Which Taxes Covered Under GST ?

GST regime is most revolutionary indirect tax regime. Since it is introduced with an intent with single point taxation feature which will induce clarity, transparency and encourages adherence to taxation. With some practical difficulties like a share of revenues for state government and central government from IGST (Integrated Goods and Services Tax) levy etc., GST rollout has been deferred. Once rolled out, GTS will be the single point of indirect taxation for most of the indirect taxes, which will be subsumed by the regime. This article will explain which taxes will be covered under GST.

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State taxes which will be covered under SGST (State GST)

State taxes which will be covered under SGST (State GST)

  • VAT (Value Added Tax):- This tax involves multiple stages wherein the different stages are covered like manufacturing, dealership etc. VAT liability is calculated by setting off the input tax (eligible VAT credit on purchases) against the output tax (the tax levied on the goods sold). However, output VAT liability can’t be reduced with a tax credit for CST paid or even excise duty paid etc. So in effect, your VAT output liability will be reduced only if you are paying VAT to registered dealers within the state.

  • Entertainment tax:- This tax is levied on films which are released in India and state has authority over the revenues. This tax is also to be subsumed by the GST. –

  • Entry tax:- This is a tax which is levied in place of octroi on goods which are moved from one state to another tax. This tax again comes under state territory and will also be covered under GST regime.

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Central taxes which will be covered under CGST (Central GST) or IGST (Integrated GST)

Central taxes which will be covered under CGST (Central GST) or IGST (Integrated GST)

  • CST (Central Sales Tax): – This is just sales tax which is levied on interstate sales and purchases. The structure is like VAT, However, too many rates of sales tax have confused the dealers. Moreover, input tax credit is a burning issue.

  • Central Excise duty:- This tax is exclusively levied on manufacture or production of goods. Usually, goods can’t leave the premises of production or manufacture without payment of excise duty. However, excise duty liability can be paid after considering the input tax credit which is most commonly known as CENVAT. CENVAT credit rules dictate which all taxes paid by the manufacturer can be claimed as input tax credit. Still, there is much ambiguity and complexity surrounding the subject of CENVAT.

  • Service tax:- Service tax is an indirect tax levied on services rendered to the service receiver. This tax has many categories like exempt services, taxable services, services taxable under reverse charge mechanism, input service distributor etc. Service tax liability is also eligible to be net off with input tax credit (which is subject to CENVAT credit rules).

  • Additional excise duty:- This is a variant of basic excise duty wherein it will be levied on the goods of special importance, in addition to basic excise duty. This tax is levied in lieu of sales tax and is apportioned between the state as well as state government based on prescribed percentage.

  • Additional customs duty :- This duty is most commonly known as CVD (Countervailing duty) and is levied on goods which are imported. The rate of tax here will be equal to central excise duty which should have been levied on like goods.

  • Special additional duty of customs (SAD):- This duty is levied so that the local producers or manufacturers will not suffer due to cheap prices as offered by the imported goods. This duty will set off any price benefit which is offered by the imported goods and will bring them at par with the local goods.

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This list is not inclusive and there are many other indirect taxes which would be subsumed by GST regime. The additional benefit to switching over to GST regime would be the availability of total input tax credit for every GST paid on purchases or services received. This would act as incentivization and more and more unregistered dealers are expected to get registered under GST.

However, there are few taxes which are carrying ambiguity with respect to their coverage under GST regime, for e.g. Entertainment tax which is levied by local bodies like municipality

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