UPSC Prelims 2014 Q27: Indian Economy – Taxation
The sales tax you pay while purchasing a toothpaste is a
- (a) tax imposed by the Central Government
- (b) tax imposed by the Central Government but collected by the State Government
- (c) tax imposed by the State Government but collected by the Central Government
- (d) tax imposed and collected by the State Government
Answer: (d) tax imposed and collected by the State Government
Explanation
Sales tax on a toothpaste (as in 2014)
When this question was asked, sales tax (VAT) on goods sold within a State was imposed and collected by the State Government.
It was a State List subject.
| Tax (before GST) | Imposed by | Collected by |
|---|---|---|
| Sales tax / VAT on sale within a State | State | State |
| Central Sales Tax on inter-State sale | Centre | State |
| Excise duty on manufacture | Centre | Centre |
| Service tax | Centre | Centre |
After 1 July 2017:
| Tax | Detail |
|---|---|
| GST | Replaced VAT, excise, service tax and others |
| On a toothpaste now | CGST + SGST, shared by the Centre and the State |
So the answer below is for the pre-GST system.
Answer: (d) tax imposed and collected by the State Government.
Why each option is right or wrong
- (a) Incorrect. Sales tax within a State was not imposed by the Central Government.
- (b) Incorrect. That describes the Central Sales Tax on inter-State sales.
- (c) Incorrect. No tax was imposed by the State and collected by the Centre.
- (d) CORRECT. Sales tax was imposed and collected by the State Government.
Key point
Before GST: sales tax/VAT was imposed and collected by States; Central Sales Tax was imposed by the Centre and collected by States. GST replaced both in 2017.
Remember
Old sales tax = State imposed and collected.
Common mistakes
- Confusing sales tax with Central Sales Tax.
- Answering with GST for a question set in 2014.
- Thinking excise duty is paid at the shop; it was levied on manufacture.
Exam tip
Pre-GST: sale inside a State = State tax. Now it is CGST plus SGST.
Sources
- Constitution of India — Seventh Schedule (State List, Entry 54, before the 101st Amendment)
- GST Council — Taxes subsumed under GST