Tax Structure Before GST

The Indian tax structure before GST was pre-dominated by VAT (Value Added Tax). India’s previous taxation system included customs duty, central excise duty, central sales tax, surcharge, and cesses. State taxes encompassed state VAT, WCT, entertainment tax, luxury tax, taxes on gambling, betting, and lottery, and sales tax deducted at source, along with surcharge and cesses. The VAT system was based on the location of goods manufacturing, sales, or services rendered. VAT had different tax rates and different laws for each state. For example, in many states excise duty was applied over VAT by the Central Government, resulting in a tax-on-tax effect, also known as the cascading effect of taxes.

Let’s take a look at the old Tax structure of India:

  • Purchase of Raw Materials—(VAT)—Manufacturing
  • Manufacturing— (VAT + Excise Duty)—Sold to Wholesaler or Warehousing
  • Sold to Wholesaler or Warehousing—(VAT)—Sold to Retailer
  • Sold to Retailer—(VAT)—Sold to Consumer

Here is the list of indirect taxes that existed before GST:

  • Central Excise Duty
  • Duties of Excise
  • Additional Duties of Excise
  • Additional Duties of Customs
  • Special Additional Duty of Customs
  • Cess
  • State VAT
  • Central Sales Tax
  • Purchase Tax
  • Luxury Tax
  • Entertainment Tax
  • Entry Tax
  • Taxes on advertisements
  • Taxes on lotteries, betting, and gambling

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