Tax System India; Before and After GST




The very first attraction towards implementation of GST was, that it will replace 15 Indirect taxes. And to one’s amazement and wonder 15 taxes did seem a lot of chaos and confusion. How does such a tax system functioned and where was it actually lacking? And how these lacunas will be met by GST? The above flow chart states all the indirect taxes that were earlier levied both at central and state level. India had a dual system of taxation of goods and services, which was quite different from dual GST. Central Government levied taxes on the following: • Income Tax: Tax collected on the income of an individual • Customs duties: Duties collected on the exports and imports of goods • Service tax: Taxes gathered on various services • Central excise: Taxes on Manufacturing of dutiable goods State Governments levied the following taxes: • Value Added Tax (VAT): Sales of goods involve the particular tax. The sales of the goods in intrastate are covered by the VAT Law of that state, whereas those among the inter-state is levied by the Central Sales Tax Act. Even the revenue gathered as per the Central Sales Tax Act is done by the State Governments and the Central Government has no role in it. • Stamp duties and Land Revenue: Since land is a matter on which only State Governments can govern, thus the Stamp duties on transfer of immovable properties are levied by State Governments. • State Excise on Liquor and certain agricultural goods. In India, indirect taxes are in vast numbers as there were several of taxes to be incurred on manufacture, import, and sale and even purchase in certain cases. Further the law was governed less by the Acts and more by day to day notifications, circulars and orders by the Governing bodies. Further there are some local indirect taxes levied like Local Body Taxes (LBT) or Octroi.

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http://www.smbconnect.in/2017/Newsletter/July/Tax-System-India-Before-and-After-GST.pdf