Enumerate the indirect taxes which have been
subsumed in the goods and services tax (GST)
in India. Also, comment on the revenue
implications of the GST introduced in India
since July 2017.
Introduction
The Goods and Services Tax (GST), implemented in July 2017, marked a significant reform, unifying India's complex indirect tax structure by subsuming numerous central and state levies into a single national tax.
Body
Indirect Taxes Subsumed under GST
- Central Excise Duty
- Service Tax
- Additional Customs Duties (CVD, SAD)
- Cesses and Surcharges
- State VAT/Sales Tax
- Entertainment Tax (excluding those levied by local bodies)
- Luxury Tax
- Entry Tax
- Purchase Tax
- Octroi
- Taxes on advertisements
- State-level Cesses and Surcharges
Revenue Implications of GST
Post-implementation, GST revenue initially experienced a dip. This was primarily due to transitional challenges, rate rationalization, and higher input tax credit claims by businesses.
Over time, collections gradually stabilized and significantly increased, reflecting improved compliance, greater formalization of the economy, and a wider tax base. It effectively reduced the cascading effect of taxes and enhanced overall tax buoyancy. States were also provided a compensation mechanism for any revenue shortfalls for a period of five years.
Conclusion
Despite initial hurdles, GST has largely succeeded in streamlining indirect taxation, fostering a common national market, and improving tax administration and compliance across India.
178 words · target ~150
The answer should list the indirect taxes subsumed under GST and then provide an analytical discussion on its revenue implications since July 2017.
Suggested structure
Introduction to GST
Indirect Taxes Subsumed under GST (Central Taxes)
Indirect Taxes Subsumed under GST (State Taxes)
Revenue Implications of GST (Initial Phase)
Revenue Implications of GST (Long-term Trends and Impact)
Conclusion
Key points
Central Taxes Subsumed: Central Excise Duty, Service Tax, CVD, SAD, Cesses & Surcharges.
State Taxes Subsumed: State VAT/Sales Tax, Entertainment Tax (except by local bodies), Luxury Tax, Entry Tax, Purchase Tax, Octroi, Taxes on advertisements, Surcharges & Cesses.
Initial revenue dip post-GST due to implementation challenges, rate adjustments, and input tax credit claims.
Gradual increase and stabilization in GST collections over time, indicating improved compliance and formalization.
Impact on tax buoyancy, widening of tax base, and reduction in cascading effect.
Compensation mechanism for states for revenue loss for a period of 5 years.
Common mistakes
Incomplete or incorrect enumeration of subsumed taxes.
Including taxes not subsumed (e.g., Basic Customs Duty, Stamp Duty, Toll Tax, Electricity Duty, Alcohol for human consumption).
Focusing only on initial revenue challenges without discussing subsequent growth and stabilization.
Not mentioning the compensation mechanism for states.
Difficulty: Medium — Requires specific factual recall of numerous taxes subsumed and an analytical understanding of the evolving revenue trends and fiscal federalism aspects of GST, rather than just a superficial overview.