GST – Current Taxes to be Subsumed

GST – Current Taxes to be Subsumed

With the aim of  harmonizing the common national market and removing cascading effect of indirect taxes, Goods and Services Tax (GST) is proposed to be implemented from April 2016. To that effect, Constitutional Amendment Bill also introduced in last winter session of the Parliament. The said bill proposed to sub-summed more than a dozen type of Central and State Level Taxes.

India has opted for a dual-GST model. Under this model GST have two components viz. the Central GST to be levied and collected by the Centre and the State GST to be levied and collected by the respective States.

It is proposed to Subsuming following taxes levied by the Central Governments:

  • Central Excise Duty
  • Additional Excise Duties
  • Excise Duty-Medicinal and Toiletries Preparation Act
  • Service Tax
  • Additional CVD
  • Special Additional Duty of Customs – 4% (SAD)
  • Surcharges
  • Ceses

Further, following taxes levied by the State Governments and also proposed for Subsuming:

  • VAT / Sales tax
  • Entertainment tax (unless it is levied by the local bodies)
  • Luxury tax
  • Taxes on lottery, betting and gambling
  • State Cesses and Surcharges (supply of goods and services)
  • Entry tax not in lieu of Octroi

However, Alcoholic liquor for human consumption is exempted from the purview of the GST.  Further, the GST Council is to decide when GST would be levied on: (i) petroleum crude, (ii) high speed diesel, (iii) motor spirit (petrol), (iv) natural gas, and (v) aviation turbine fuel. On such goods, taxes are continue to be levied as per current applicable laws,

It is pertain to note that there are still few indirect taxes that may or may not be subsumed under the GST regime as there is no consensus among States and Centre Governments –

  • Basic Custom Duty
  • Stamp Duty
  • Vehicle Tax
  • Electricity Duty
  • Other Entry taxes

Government is in advance stage of negotiation with the State Governments for fixing the revenue neutral rate i.e. GST rate. Also the Constitution Amendment Bill also expected to passed in the current budget session of the Parliament. These two would be the next critical step towards the GST Implementation.

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