India currently has a dual system of taxation of goods and services, by the Union as well as States.  Taxes on goods are described as "VAT" at both Central and States level. It has adopted value added tax principal with tax credit mechanism for taxation of goods and services, respectively, with Limited cross-levy set-off.

EARLIER INDIRECT TAX STRUCTURE

Following are the features of earlier indirect taxation in India :

  • Excise duty was levied only at manufacture level and not up to the retail level. 
  • Cascading effect at that time was reduced to a great extent with the use of declaration forms, with the introduction of state VAT,  there was combination of origin based (Central sales tax) and destination based multi-point system of taxation. 
Set-off of input tax credit at the State Level VAT was only on the goods and no cross set-of was allowed between the goods and services. Further, no set-off of the central sales tax, whatsoever was available.

MAIN EARLIER INDIRECT TAXES

EARLIER INDIRECT TAXES IN INDIA

  1. Custom duty - applied on Import and Export
  2. Excise duty   - applied on manufacture
  3. Service tax   - applied on provision of service
  4.  Central sales tax - applied on Sale
  5.  State VAT - applied on sale
  6. State excise duty - applied on Manufacture/
      (On liquor)              Import in state