Brief introduction of indirect taxation before GST Law

Hello Friends,

             Today i will discuss our indirect taxation system in brief before GST Act. 

So, let me start.....

              Currently, there are various indirect taxes on very same transaction, either by central govt., state govt. or local authorities.

Some of them are as follow:-

1) VAT/CST,

2) Service Tax,

3) Excise Duty,

4) Customs Duty,

5) Entry Tax,

6) Luxury Tax, etc.

However, Taxable Events in each cases is different like, service tax is levied on service rendering, excise duty is levied on manufacturing of goods, VAT/CST is levied on Sales of goods, etc.

The major source of income of government are from excise duty, customs duty levied on import of goods, service tax, VAT/CST.

According to Schedule 7th of Indian Constitution, central & state government has power to levy tax. The entries in List-1, 2, & 3 of Schedule 7th of Indian Constitution provide power to levy taxes.

The Power of levy this taxes is summarized in below graph:-

List-1 and 2 is also known as Union list and State list are respectively. All entries in list-1 is levied by central government ans entries in list-2 is levied by state government.

As we can see in VAT/CST, there are two entries,

Entry No:-54 of List-2 is for State VAT and 92A of List-1 is for CST.

Here very interesting point about CST, it is levied by central Government but it is collected by state government.

      

       Now we can see in above, Central Government has power to levy excise duty, custom duty, service tax and central sales tax(but collected by state government). Similarly

State government has a power to levy VAT, Luxury Tax, Entry Tax, etc.

Note:- CST levied by Central Government but collected by State Government. That's why it is a revenue of State Government not a Central Government.