Concept of Indirect Tax:

Indirect taxes are levied on goods, services, or transactions and are indirectly paid by consumers
through the prices of goods and services. Unlike direct taxes, which are levied on individuals or
entities, indirect taxes are imposed on goods and services at various stages of the supply chain. When
businesses or sellers include these taxes in the prices of their products, consumers ultimately bear the
tax burden. Indirect taxes play a crucial role in generating revenue for the government and regulating
the economy.

Types of Indirect Taxes:

There are several types of indirect taxes, each serving different purposes and applied in various ways.
Here are some common types of indirect taxes:

• Goods and Services Tax (GST): GST is a comprehensive indirect tax that replaced a multitude
of central and state-level taxes in many countries, including India. It is levied on the supply of
goods and services and is divided into Central Goods and Services Tax (CGST), State Goods and
Services Tax (SGST), and Integrated Goods and Services Tax (IGST) for intra-state and inter-
state transactions.
• Value Added Tax (VAT): VAT is a consumption-based tax levied on the value added at each
stage of production or distribution of goods and services. It is similar to GST but was prevalent
before the implementation of GST in many countries.
• Excise Duty: Excise duty is a tax levied on the production of goods within the country. It is
imposed at the time of manufacturing or production and is usually included in the product's
price.
• Customs Duty: Customs duty is a tax imposed on goods that are imported into or exported
from a country. It is meant to control the flow of goods and protect domestic industries.
• Service Tax: Service tax was an indirect tax levied on specific services provided by service
providers. In many countries, it has been subsumed under GST or a similar consumption-based
tax.
• Central Sales Tax (CST): CST was applicable to inter-state sales of goods in India before GST.
It was collected by the Central Government but distributed to the originating state.
• Entertainment Tax: Entertainment tax was levied on activities like movie tickets, amusement
parks, concerts, etc.
• Octroi: Octroi was a tax levied on the entry of goods into municipal areas for consumption, use,
or sale. It was prevalent in certain states in India before GST.
• Stamp Duty: Stamp duty is a tax imposed on certain legal documents, such as property
agreements and financial transactions.
• Luxury Tax: Luxury tax is levied on the sale of luxury goods and services.
• Toll Tax: Toll tax is collected for the use of specific infrastructure facilities, such as roads,
bridges, or tunnels.
• Environmental Taxes: Taxes like carbon tax and pollution tax are imposed to discourage
activities that harm the environment.

These are just a few examples of the many types of indirect taxes that can exist in a country's tax
system. The specific types and rates of indirect taxes vary from country to country and are subject to
changes in the economic and policy landscape. The main objective of indirect taxes is to mobilize
revenue for the government and influence consumer behavior while promoting economic growth and
stability.
 Right to impose indirect tax by centre union state and union territory
governments before and after 101 St amendment of the constitution of India
introduction of GST in India

Before the 101st amendment of the Constitution of India and the introduction of the Goods
and Services Tax (GST), India's indirect tax system was characterized by a complex web of
multiple taxes levied by both the Central Government and State Governments. Each level of
government had the authority to impose indirect taxes on specific goods and services. Let's
explore the concept and types of indirect taxes imposed by the Central Government, State
Governments, and Union Territory Governments before and after the implementation of
GST.
1. Indirect Taxes Before GST:
A. Central Government: The Central Government had the authority to levy various indirect
taxes, some of the key ones were:
i. Central Excise Duty: It was levied on the manufacturing of goods within the country.
ii. Service Tax: It was applicable to certain specified services provided by service providers.
iii. Additional Customs Duty (Countervailing Duty - CVD): It was imposed on imported goods
to offset the excise duty levied on similar goods produced domestically.
iv. Special Additional Duty (SAD): This duty was levied on imported goods, similar to CVD, to
protect indigenous industries.
v. Central Sales Tax (CST): It was imposed on inter-state sales of goods and collected by the
Central Government but distributed to the originating state.
B. State Governments: State Governments had the power to levy various indirect taxes,
including:
i. Value Added Tax (VAT): It was imposed on the sale of goods within the state and varied
from state to state.
ii. Entry Tax: It was imposed on goods entering a state for consumption, use, or sale.
iii. Entertainment Tax: It was levied on entertainment activities like movies, amusement
parks, etc.
iv. Luxury Tax: It was applicable to luxury goods and services.
v. Octroi: It was a tax levied on the entry of goods into municipal areas for consumption,
use, or sale.
2. Indirect Taxes After GST (Post 101st Amendment):
To simplify the complex indirect tax structure and create a unified tax system across the
country, the 101st amendment to the Indian Constitution was passed, introducing the
Goods and Services Tax (GST). GST is a comprehensive indirect tax that subsumed a
majority of the central and state-level indirect taxes. After the amendment, the taxation
authority is distributed as follows:
A. Central Government: The Central Government continues to have the authority to levy
and collect Central Goods and Services Tax (CGST) on the intra-state supply of goods and
services.
B. State Governments: State Governments now have the authority to levy and collect State
Goods and Services Tax (SGST) on the intra-state supply of goods and services.
C. Union Territory Governments: Union Territories with a legislature can now levy and
collect Union Territory Goods and Services Tax (UTGST) on the intra-UT supply of goods and
services.
D. Integrated Goods and Services Tax (IGST): The Central Government collects IGST on
inter-state supply of goods and services and on imports. It is then distributed among the
respective states or Union Territories.
Benefits of GST:
The implementation of GST brought several benefits, including:
Simplified Tax Structure: GST replaced multiple indirect taxes with a single tax, simplifying
the tax regime for businesses.
Elimination of Cascading Effect: GST eliminated the cascading effect of taxes (tax on tax) by
allowing businesses to claim input tax credit for taxes paid on inputs.
Wider Tax Base: GST expanded the tax base by including more sectors and services.
Uniform Tax Rates: GST aimed at creating uniform tax rates across states, promoting ease
of doing business and reducing tax-related complexities.
Boost to the Economy: GST was expected to boost economic growth by promoting trade
and reducing tax evasion.
In conclusion, before the 101st amendment and the introduction of GST, India had a
complex indirect tax system with multiple taxes levied by the Central Government and
State Governments. GST brought about significant changes, unifying the tax structure and
streamlining the taxation process for the entire country.
Specially prepared for Ayesha