GST: One Nation, One Tax, One Market
Goods and Service Tax (GST) is the single comprehensive indirect tax, operational from 1 July 2017, on supply of goods and services, right from the manufacturer/ service provider to the consumer. It is a destination based consumption tax with facility of Input Tax Credit in the supply chain. It is applicable throughout the country with one rate for one type of goods/service.
It has amalgamated a large number of Central and State taxes and cesses. It has replaced large number of taxes on goods and services levied on production/ sale of goods or provision of service. As there have been a number of intermediate goods/services, which were manufactured/provided in the economy, the pre GST tax regime imposed taxes not on the value added at each stage but on were manufactured/provided in the economy, the pre GST tax regime imposed taxes not on the value added at each stage but the total value of the commodity/service with minimal facility of utilisation of Input Tax Credit (ITC). The total value included taxes paid on intermediate goods/services.
This amounted to cascading of tax. Under GST, the tax is discharged at every stage of supply and the credit of tax paid at the previous stage is available for set off at the next stage of supply of goods and/or services. It is thus effectively a tax on value addition at each stage of supply. In view of our large and fast growing economy, it addresses to establish parity in taxation across the country, and extend principles of 'value- added taxation' to all goods and services. It has replaced various types of taxes/cesses, levied by the Central and State/UT Governments.
Some of the major taxes that were levied by Centre were Central Excise Duty, Service Tax, Central Sales Tax, Cesses like KKC and SBC. The major State taxes were VAT/Sales Tax, Entry Tax, Luxury Tax, Octroi, Entertainment Tax, Taxes on Advertisements, Taxes on Lottery /Betting/ Gambling, State Cesses on goods etc. These have been subsumed in GST.
Q) GST is the amalgamation of which of the following taxes?
Correct Answer :
Large number of central and state indirect taxes
Solution :
The correct option is: Large number of central and state indirect taxes
Step-by-Step Explanation:
1. Understanding the Nature of GST:
Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services. It is not a direct tax (like income tax or corporate tax), but rather an indirect tax that replaced previous indirect taxes levied by the Central and State governments.
2. Analyzing the Provided Text:
According to the passage:
- "Goods and Service Tax (GST) is the single comprehensive indirect tax..." This clearly states that GST deals with indirect taxes, ruling out options related to direct taxes.
- "It has amalgamated a large number of Central and State taxes and cesses." The passage specifies that it amalgamated a "large number" rather than "all" taxes.
- The text lists specific examples of major taxes that were subsumed: Central Excise Duty, Service Tax, Central Sales Tax (levied by the Centre), and VAT/Sales Tax, Entry Tax, Luxury Tax, Octroi, Entertainment Tax (levied by the States). All of these are examples of indirect taxes.
3. Evaluating the Options:
- All Central taxes / All State Taxes: These options are incorrect because GST did not subsume all central or state taxes (for example, direct taxes like income tax, and certain indirect taxes like custom duties or state excise on alcohol, remain outside GST).
- Large number of central direct taxes: This is incorrect because GST is an indirect tax and did not replace direct taxes.
- Large number of central and state indirect taxes: This aligns perfectly with the passage's statement that GST is a comprehensive indirect tax which amalgamated a "large number of Central and State taxes and cesses."
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