GS Paper 3 10 marks · 150w 9 min Medium

Enumerate the indirect taxes which have been subsumed in the Goods and Services Tax (GST) in India. Also, comment on the revenue implications of the GST introduced in India since July 2017.

Subtopic: Indian Economy · GST & Fiscal Federalism

Model answer outline

How to structure your answer

Introduction (GST as unified indirect tax from July 2017) → enumerate central taxes subsumed → enumerate state taxes subsumed → revenue implications: compensation, buoyancy, states' concerns → Conclusion.

Full model answer

Written within the word limit

150 words · target 150 words · 9 min

The Goods and Services Tax, rolled out on 1 July 2017 under the 101st Constitutional Amendment, subsumed a maze of Central and State indirect taxes into a single destination-based levy, creating 'one nation, one tax'.

Central taxes subsumed

Central Excise Duty and Additional Excise Duties
Service Tax
Additional Customs Duty (CVD) and Special Additional Duty (SAD)
Central surcharges and cesses on goods and services

State taxes subsumed

State VAT and Central Sales Tax
Entry Tax and Octroi, Purchase Tax
Luxury Tax and Entertainment Tax (except that levied by local bodies)
Taxes on advertisements, lotteries, betting and gambling; State cesses and surcharges

Revenue implications

To protect states, the Centre guaranteed 14% annual revenue growth for five years, funded by a GST compensation cess. Early years saw revenue shortfalls and disputes, sharpened by the pandemic, straining Centre-state trust. Over time collections stabilised and monthly GST revenues have consistently crossed ₹1.5 lakh crore, reflecting improving buoyancy and formalisation, though petroleum, alcohol and electricity remain outside GST.

Key points

What an examiner expects to see

GST introduced 1 July 2017 via the 101st Constitutional Amendment; a destination-based, dual (CGST+SGST/IGST) tax.
Central taxes subsumed: Central Excise, Additional Excise Duties, Service Tax, CVD and SAD, central cesses/surcharges.
State taxes subsumed: VAT, CST, Entry Tax/Octroi, Luxury Tax, Entertainment Tax, Purchase Tax, advertisement and lottery taxes.
Outside GST: petroleum products, alcohol for human consumption, electricity, and stamp duty.
Compensation guarantee: 14% annual revenue growth to states for 5 years, funded by GST compensation cess.
Early revenue shortfalls and Centre-state friction, aggravated by the COVID-19 slump.
Later revenue buoyancy improved; monthly collections regularly exceed ₹1.5 lakh crore with wider formalisation.

Examples to use

Concrete cases, schemes and judgments

GST Council under Article 279A as the Centre-state decision-making body.
GST compensation cess and the 14% growth guarantee for states (2017-22).
Record monthly GST collection surpassing ₹2 lakh crore in April 2024.
Continued exclusion of petrol and diesel keeping cascading taxes on fuel.

Keywords / terms

Terminology to weave into the answer

destination-based taxinput tax creditGST compensation cessGST Councilrevenue buoyancyfiscal federalism