In this article, we will discuss different types of Taxes levied by the Centre as per Constitution of India and their distribution between Centre and State:
1.Duties levied by the Union but collected and appropriated by the States (Article 268):
This includes Stamp Duty as mentioned in Union List which will be levied by the Union Government but completely belongs to State. (100% to State in which such stamp duty is levied)
2. Taxes which are levied & Collected by the Union but Assigned to the States (Article 269):
This includes Taxes on the inter state sale or purchase of goods and taxes on the consignment of goods except GST on inter-state supply of Goods. (100% to States). In this case, since two or States may be involved in case of inter-state sale, distribution among States will be determined by Parliament by law not by Finance Commission.
3. GST on Inter-State Supply of Goods & Service (Article 269A): In GST, there are three kind of taxes being imposed i.e.
In case of Intra-State Supply (i..e with in State)
a. CGST : That belongs to Centre that will be apportioned between Centre and State as per Finance Commission.
b. SGST: That 100% belongs to State.
c. Compensation Cess (on some specific products): will be used to compensate the Loss to the States on migration to GST.
In Case of Inter-State Supply
a. IGST (CGST+SGST): SGST will belong to State. CGST Component will be apportioned between Centre and State as per Finance Commission.
b. Compensation Cess (on some specific products): will be used to compensate the Loss to the States on migration to GST.
4. Taxes levied and distributed between the Union and the States (Article 270)
All taxes and duties referred to in the Union List including Income Tax, Custom Duty, Excise Duty, GST (as explained above) etc. will be distributed among Centre & State except:
a. Surcharge (like on Income Tax) & Cess (like Infrastructure Cess on motor vehicle, Krishi Kalyan Cess etc.) levied by the Parliament for the use of Union on these taxes except Cess on GST which will be used to compensate State.
(Note: Now you can understand why States oppose Union in case of imposition of Surcharge and Cess)
(Surcharge is not for specific purpose but Cess is for specific purpose).