Which one of the following State Taxes have NOT been replaced by GST?

Correct option is C

The Special Additional Duty of Customs (SAD) was a type of customs duty imposed on imported goods to offset the impact of state-level VAT and create a level playing field between imported and domestically produced goods.

Key Features of SAD:

1. Levy and Purpose: SAD was levied at a rate of 4% under Section 3(5) of the Customs Tariff Act, 1975 to counterbalance the VAT or sales tax that domestic goods were subject to.
2. Applicability: Applied on imported goods before they entered the domestic market.
3. Refund Mechanism: Businesses could claim refunds for SAD if they resold the imported goods in India by paying applicable VAT.

SAD and GST

• With the introduction of GST on July 1, 2017, state VAT was replaced by GST, making SAD redundant.
• SAD was abolished and replaced by Integrated GST (IGST) on imports, which ensures that both domestic and imported goods are taxed at the same rate.
• Now, instead of SAD, IGST is collected at the port of entry and credited to the importing business, eliminating the need for a refund mechanism.

Information Booster:

While SAD and Countervailing Duty (CVD) were replaced by IGST, the following customs duties still exist:

1. Basic Customs Duty (BCD) – Still applicable on imports and not replaced by GST.
2. Anti-Dumping Duty – Imposed to protect domestic industries from cheap imports.
3. Safeguard Duty – Levied to protect domestic producers from import surges.
4. Social Welfare Surcharge (SWS) – Collected to fund social welfare programs.

So, while GST replaced SAD, it did not eliminate all customs duties.

Additional Knowledge:

(a) Luxury Tax

• Luxury Tax was a state-level tax imposed on luxury goods and services like five-star hotels, resorts, and high-end products.
• Under GST, luxury items are now taxed at higher GST slabs (18% and 28%), making Luxury Tax obsolete.
• Luxury tax was subsumed under GST, making this option incorrect.

(b) Purchase Tax

• Purchase tax was a state-imposed tax on buyers of certain agricultural and industrial goods.
• States like Punjab, Haryana, and Gujarat levied Purchase Tax on products such as sugarcane, cotton, and timber.
• Under GST, Purchase Tax was abolished because GST applies uniformly to purchases and sales.
• Hence, Purchase Tax was replaced by GST, making this option incorrect.

(d) Taxes on Lotteries, Betting, and Gambling

• Lotteries, betting, and gambling are taxed under GST at 28%.
• However, states still have the power to regulate and impose additional taxes on these activities.
• These taxes were NOT fully replaced by GST, but they still fall under GST for standard taxation purposes.
• Since GST applies to these activities, this is not the correct answer.