Note 1: [[Customs Duty in India]]
tags: #Economy #IndirectTax #Customs Duty #UPSC
aliases: [International Trade Tax, Tariff][!INFO] Definition: Customs Duty Customs Duty is an indirect tax implemented in 1962 under the Customs Act. It is levied on commodities transferred across international boundaries (imports and exports) with the primary goal of safeguarding the domestic economy and regulating international trade.
Classification of Customs Duties
The government imposes various types of duties to protect domestic industries from unfair competition and to manage trade balances:
| Duty Type | Description | Rationale |
|---|---|---|
| Basic Customs Duty | The standard tax on imported commodities under Section 12 of the 1962 Act | Revenue generation and basic protection. |
| Countervailing Duty (CVD) | Levied to neutralize the price advantage foreign manufacturers gain from receiving subsidies from their home governments | Ensures “level playing field” for Indian products |
| Anti-Dumping Duty | A protectionist tariff on imports priced substantially below their “normal value” in their home market | Prevents foreign companies from “dumping” cheap goods to kill domestic competition |
| Protective Duty | Imposed when authorities believe exporting a specific good will harm the national economy | Conservation of essential resources. |
| Safeguard Duty | Levied if a sudden surge in imports is felt to be damaging the domestic industry. | Emergency protection for local firms. |
Recent Context: In 2021, India imposed anti-dumping duties on certain Chinese products (aluminum and chemicals) for five years to protect local manufacturers.
Related: [[GST Overview and Structure]], [[Direct vs Indirect Taxes]]
Note 2: [[Remnant Indirect Taxes (Non-GST Items)]]
tags: #Economy #ExciseDuty #VAT #Petroleum #Alcohol
aliases: [Non-GST Taxes, State Excise][!INFO] Context: The Exclusion List While GST replaced most indirect taxes, certain high-revenue items were kept out of its purview to allow the Union and States to maintain fiscal autonomy over them. These items are still governed by the older Excise Duty and Value Added Tax (VAT) regimes.
Items Outside the Purview of GST
The following products are subject to Central Excise and State VAT instead of GST.
- Petroleum Products: Crude oil, Petrol, High-speed diesel, Natural Gas, and Aviation turbine fuel.
- Alcohol: Specifically alcohol for human consumption.
- Electricity: Taxed by states via electricity duty.
- Tobacco: Tobacco is unique because it is subject to both GST and Central Excise Duty
Mechanism of Remnant Taxes
- Excise Duty: Implemented in 1944, it is collected on the manufacturing of products. For non-GST items like alcohol and narcotics, the states continue to collect excise.
- VAT (Value Added Tax): Replaced the old Sales Tax system in 2005. It is a multi-point consumption tax where dealers get Input Tax Credit (ITC) for taxes paid at earlier stages. For petroleum and alcohol, the state-specific VAT rates still apply.
Related: [[GST Overview and Structure]], [[Taxation in India MOC]]
Note 3: [[Subsumed Indirect Taxes (Pre-2017)]]
tags: #Economy #TaxHistory #GSTSubsumed
aliases: [Pre-GST Regime, Service Tax, CST][!INFO] Definition: Subsuming Subsuming refers to the process of merging multiple different taxes into one single unified tax (GST). This was done to unify the fractured Indian market and eliminate the cascading effect (tax-on-tax).
Major Taxes Now Replaced by GST
- Service Tax: Introduced in 1994-95, initially on only three services (telephone, insurance, stockbroking). It widened over years until it was subsumed under GST in 2017.
- Central Sales Tax (CST): Implemented in 1956, this was a Union tax on inter-state trade assigned to the “Origin State.” It has been entirely replaced by IGST.
- Octroi and Entry Tax: Local taxes collected by municipal bodies or states when goods entered a specific territory. These were major logistical hurdles now removed.
- Luxury and Entertainment Tax: Previously levied by states on hotels and cinemas, now included in the GST slabs.
The Cascading Effect (Historical Perspective)
Before 2017, a manufacturer would pay Excise Duty to the Centre and then VAT to the State on the same value. Because VAT was often calculated on the price inclusive of excise, it created a “tax on tax.” GST solved this via the Input Tax Credit (ITC) mechanism.
Related: [[GST Mechanisms and Schemes]], [[Customs Duty in India]]