Simple explanation
Different taxes and subjects belong to different levels of government. Some are central, some state, some local and some shared through GST.
GST rates are generally decided through the GST Council. States participate in the Council, but one state cannot normally create completely separate GST rates for ordinary goods and services.
Real-life Indian example
Income tax goes to the Centre. State excise on alcohol goes to the state. Property tax is collected by a local body.
Visual flow
| Tax or subject | Who mainly controls it |
|---|---|
| Income Tax | Central Government |
| Corporate Tax | Central Government |
| Customs Duty | Central Government |
| GST | GST Council + Centre + States |
| State Excise | State Government |
| Stamp Duty | State Government |
| Road Tax | State Government |
| Property Tax | Local Body |
| Electricity Duty | State Government |
Key terms
- Divisible Pool: Central taxes that are shared with states as recommended by the Finance Commission.
- Finance Commission: A constitutional body that recommends how tax revenue and grants are shared with states.
- State Excise: A state tax commonly applied to alcohol production and sale.
- Stamp Duty: A state levy paid on legal documents such as property registration.
Common confusion
- GST is shared, but not freely customised by each state.
- Petrol VAT and alcohol excise can vary sharply by state.
- Property tax is local, not central.
Why this matters
This explains why some prices are uniform nationally while others differ between states and cities.
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