Understanding

India's Tax Evolution

This presentation will take you through the transformation of India's tax
landscape, from the pre-GST era to the introduction and impact of the Goods and
Services Tax (GST) system.

by Shruti Sharma
Pre-GST Tax System in India
Central Taxes State Taxes Challenges

The pre-GST system had various State-level taxes included VAT, The pre-GST system had issues
central taxes like Excise Duty, Entry Tax, Luxury Tax, and more, like tax cascading, high
Service Tax, and Customs Duty. leading to a complex web of compliance costs, and lack of input
indirect taxes. tax credit.
Indirect Taxes Under Pre-GST

1 Excise Duty 2 Service Tax

Levied on the manufacture of goods, leading to Applied on various services, creating a complex
tax on tax. tax structure.

3 VAT/Sales Tax 4 Custom Duties

Charged by states, resulting in tax barriers Imposed on imports, adding to the overall tax
between states. burden.
Challenges with Pre-GST System
Tax Cascading Compliance Complexity
Taxes were levied on taxes, leading to an increase in Businesses had to navigate a complex web of central
the overall tax burden. and state taxes, increasing compliance costs.

Lack of Input Tax Credit Barriers to Trade

Inability to claim credit for taxes paid on inputs, Tax barriers between states hindered the free flow of
resulting in increased costs for businesses. goods and services across India.
Transition to Goods and Services Tax
(GST)
1 Idea Conception
The GST was first proposed in 2000 to simplify the indirect tax system.

2 Constitutional Amendment
In 2016, the Constitution was amended to pave the way for the GST.

3 Implementation
The GST was finally implemented in India on July 1, 2017.
Key Features of the GST System

Unified Tax Rate Seamless Input Tax Removal of Tax Simplified

Credit Barriers Compliance
A single tax rate applied
across goods and Businesses can claim GST enabled the free A single, unified tax
services, replacing the credit for taxes paid on flow of goods and system reduced the
previous multiplicity of inputs, avoiding tax services across state compliance burden for
taxes. cascading. borders. businesses.
Impact of GST on Businesses and
Consumers
Businesses
Improved cash flow, reduced compliance costs, and better input tax credit.

Supply Chain Efficiency

Seamless movement of goods and services across state borders.

Consumers
Potentially lower prices due to reduced tax cascading and compliance costs.
Conclusion and Future Outlook
Positives Challenges

Simplified tax structure Ongoing implementation issues

Improved tax compliance Disputes between center and states

Boost to economic growth Need for further rate rationalization