Tag Archives: which taxes will subsume in GST

What to expect from GST

We meet a lot of people asking about How is GST? Will it complicate or simplify tax regime? What will change with GST? What will be the rate of Tax in GST regime? Will Octroi stay after GST arrives? When can we expect GST to launch? Also whether the cross regime credit will available? As per recommendations by Joint Working Group appointed by Empowered Committee in 2007, the GST in India may have four components in its tax structure as –

  1. Central Tax on Goods
  2. Central Tax on Services
  3. State VAT on Goods
  4. State VAT on services

As far as the administration of the GST is concerned, it’s proposed that, the state shall administer the State GST and the Centre shall administer the State GST. So the complications around the duplicate administration and softer conflict of interest on what’s state’s prerogative v/s. what’s centre’s prerogative tend to continue.

Now the point which is top of the mind issue as to which taxes will subsume or stop to exist post GST regime. Let’s do a table for easy understanding as to what will subsume in which one?

Proposed to be subsumed in Central GST Proposed to be Subsumed in State GST
Central Excise Duty (CENVAT) Value Added Tax (VAT)
Additional Duty of Excise Purchase tax if any
Additional Customs Duty in Nature of Excise Duties (Countervailing Duty) State Excise Duty except liquor
Cesses Levied by the Union Entertainment Tax (Unless levied by Local Body)
Service Tax Luxury Tax
Central Sales Tax Octroi and Entry Tax
Surcharges Levied by the Union Taxes on Lottery, Betting and Gambling

Some other highlight clarifications which may be of use for understanding the Goods and Services Tax i.e., GST in India are:

  • Broadly GST is proposed to be having two components Central and State GST.
  • Taxable event is proposed to shifted to sale of goods rather than on manufacture currently.
  • Exports will be zero rated or free from all duties and taxes. Certain products will be kept out of GST net and the taxes may be levied by the local bodies.
  • Cross utilization of between central and state GST may NOT be allowed.

All in all GST seems to be complicated to start with although it has engulfed multiple indirect taxes into one as of now. Only more understanding the unfoldment will make things clearer.