Here's what top CFOs are betting
on to avoid GST notices:
Here's what top CFOs are betting on to avoid GST notices:
Book a demo to find out!
Index

Taxes Subsumed and Not Subsumed Under GST

By Annapoorna

|

Updated on: Mar 11th, 2024

|

3 min read

In India, the Goods and Services Tax (GST) represents a pivotal shift in indirect taxation, replacing various taxes and levies with a unified system. 

This transformation under the GST regime has streamlined the tax process, alleviating the complexity and multiplicity of previous taxes. Yet, confusion persists among taxpayers regarding the specific taxes that have been subsumed under GST. 

The article aims to clarify which taxes are included and excluded within the GST framework, shedding light on its comprehensive impact.

Principles of taxes subsumed

The principles of tax inclusion under the Goods and Services Tax (GST) are guided by specific criteria outlined by the Indian Constitution and GST laws. 

These criteria were established to identify which central, state, and local taxes could be incorporated into GST. The key principles are as follows:

  • Indirect Nature of Taxes: GST encompasses taxes that are incorporated into the cost of goods and services. Taxes unrelated to purchasing or selling goods and services do not fall under the GST regime.
  • Inclusion in the Transaction Chain: Taxes under GST are applicable throughout the supply chain, encompassing the delivery of goods and services from production to final consumption, ensuring a comprehensive tax framework.
  • Uninterrupted Tax Credit Flow: Integrating taxes under GST allows businesses to seamlessly claim tax credits for taxes paid on inputs against taxes due on sales, facilitating cross-state transactions.
  • Fair Sharing of Money: When combining taxes into GST, it's important that both the government in a state and the whole country get a fair share of the tax money.

These principles aim to streamline tax administration, eliminate tax on tax, and ensure that the GST system is comprehensive, equitable, and conducive to a unified market across the country.

List of taxes subsumed under GST in India 

The Goods and Services Tax (GST) consolidated numerous central and state taxes into a single tax system. Here's a simplified overview of the taxes that were absorbed into GST-

Central Taxes Subsumed:

  • Central Excise Duty (CENVAT): Central Excise Duty (CENVAT) is an indirect tax imposed and collected by the central government on goods manufactured or produced within India.
  • Additional Excise Duties: Additional Excise Duties refer to an extra tax on specific domestically manufactured items, as outlined under the 1957 'Additional Duties of Excise Act,' with revenue divided between the central and state governments.
  • Duties of Excise (Medicinal and Toilet Preparations): It is an indirect tax on the making of medicinal and toilet preparations containing alcohol, narcotic drugs.
  • Additional Duties of Excise (Goods of Special Importance): It is an additional tax levied and collected on special items like tobacco, sugar, and clothes made from textiles.
  • Additional Duties of Excise (Textiles and Textile Products): This is an additional charge specifically for products made from textiles.
  • Additional Duties of Customs (Countervailing Duty, CVD): Additional Duties of Customs (Countervailing Duty, CVD) is a tax applied to imported goods to align their prices with those of domestic products, supporting Indian manufacturers.
  • Service Tax: Service Tax is applied to various services, including restaurant dining, travel services, and cable television subscriptions.
  • Central Surcharge and Cess: These were extra charges and taxes the central government added to the supply of goods and services. It’s like an extra charge on luxury items to fund education or health initiatives.

State Taxes Subsumed:

  • State VAT (Value Added Tax): A tax on the value added to goods and services at each stage of the supply chain, varying by state.
  • Central Sales Tax: Central Sales Tax is applied to the sale of goods that occur across state lines.
  • Luxury Tax: Luxury Tax is imposed on high-end goods and services considered luxurious.
  • Entry Tax (All Forms): In all its forms, states charge taxes on goods that enter their territory from another state.
  • Entertainment and Amusement Tax: Entertainment and Amusement Tax is levied on commercial entertainment and amusement activities by state governments.
  • Taxes on Advertisements: Taxes on Advertisements are applied to advertisements that appear in print media.
  • State Surcharge and Cess: All state-imposed surcharges and cesses were included.

List of taxes not subsumed under GST in India

The following taxes are not subsumed under GST:

  • Basic Customs Duty: Basic Customs Duty is a tax on imported goods, separate from GST, aimed at regulating imports and supporting local businesses, calculated based on the item's value entering India.
  • Tax on Petrol and Diesel: These fuels don't fall under GST. Instead, they're taxed by both the central and state governments due to the adverse revenue impact it has. 
  • Tax on Tobacco and Alcohol: This lets states keep taxing these products.
  • Stamp Duty on Property: When people buy property, they pay this tax to the state, and it's not included in GST. The cost varies in different states.
  • Electricity Duty: The tax on electricity consumption remains outside GST. It applies to individuals and businesses based on their electricity usage.
  • Vehicle Tax: When registering a new vehicle, people pay this tax to the state, which isn't part of GST.
  • Property Tax: This tax is on owning property like houses and land. Local governments charge it, and it's separate from GST.

Impact of taxes subsumed under GST

Consolidating taxes under GST simplifies tax management, benefiting businesses with easier compliance and operational efficiency. The following points represent the impact of taxes submitted under GST in a better way:

Pros:

  • Reduces the cascading effect of taxes.
  • Ease of doing business with a reduction in multiple compliances
  • GST Simplifies Taxes: It applies one tax rate to all goods and services, reducing business complexity.
  • One Tax System: GST combines various taxes into one, making tax compliance easier for businesses.
  • Tougher on Tax Avoidance, Good for Revenue: GST has tightened up tax collection and made it harder to skip paying taxes, helping the government earn more.
  • GST has made it cheaper for smaller companies and new startups, supporting their growth.
  • Businesses get a pricing advantage due to ITC claims
  • There was a drop in prices of many commodities due to a reduction in tax rate.  

Cons:

  • Higher Tax Rates for Certain Services: GST makes certain services, like phone bills and bank fees, more expensive due to higher tax rates.
  • Exclusion of Essential Commodities: Items like petrol and alcohol don't fall under GST, so their prices remain unaffected by the tax reform.
  • Need to obtain multiple GSTINs: Multiple registrations of GST to be taken by businesses operating in more than one state.

Related Articles
Types of Taxes in India: Direct Tax and Indirect Tax
Structure of GST in India: Four-Tier GST Tax Structure Breakdown

Frequently Asked Questions

Is there a central tax which is not subsumed under GST?

Basic Customs Duty is an indirect tax that is kept outside GST.

How many taxes are subsumed under GST?

17 major taxes are subsumed under GST.

What are the taxes not subsumed under GST?

Central Excise Duty, Service Tax, VAT, and several others are included.

Which taxes are not subsumed under GST?

Taxes such as BasicCustoms Duty, Excise Duty on Petroleum are excluded.

Has entertainment tax been subsumed under GST?

Yes, it has been included in GST.

Is corporate tax subsumed under GST?

No, corporate tax is different from GST. It is a direct tax applicable for companies under the Income Tax law.

Is gift tax subsumed under GST?

No, gift tax is not included in GST.

Is OCTROI tax subsumed under GST?

Yes, OCTROI has been subsumed by the  GST law.

Is road tax subsumed under GST?

No, road tax remains outside the scope of GST.

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

summary-logo

Quick Summary

In India, GST replaced various taxes with a unified system, streamlining processes. Principles guide tax inclusion under GST framework. It included central taxes like excise duty and state taxes like VAT. Taxes not subsumed include customs duty and taxes on fuel. Impact: simplifies tax management, benefits businesses, reduces prices, tighter tax collection. Cons: higher tax rates for certain services, exclusion of essential commodities, need for multiple GSTINs.

Was this summary helpful?
liked-feedbackliked-feedback

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption