In India, the tax system has traditionally been, literally, quite taxing. There are the central government taxes such as the service taxes, central surcharges and central cesses. Then there are those levied by the state government: VAT/sales taxes, entertainment tax, luxury tax, and state cesses.
India’s taxation is fragmented, and can be a bit complex. There are separate taxes for goods and services, and this necessitates division of transaction values into value of goods and values of services for taxation, leading to greater complications, increased administrative work, and higher compliance costs.
Thus, the consumer ends up paying for multiple taxes levied by the centre, as well as the various state governments, on services and materials that go into making a single product, and transporting this product from the factory to the retail outlet.
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However, all that is now set to be over. On 20 March 2017, the Union Cabinet approved four legislations that were needed to get the Goods and Services Tax (GST) introduced in Parliament; these bills had earlier been approved by the GST Council.