Taxation & GST: structure, council & reform
India's tax architecture, the constitutional design of GST, the GST Council under Article 279A, and the reform agenda for UPSC GS-3.
The constitutional anatomy of taxation
The power to tax in India is a creature of the Constitution. Article 265 lays the cardinal rule: "No tax shall be levied or collected except by authority of law." The Seventh Schedule then divides taxing powers between the Union (List I) and the States (List II), with no taxing entry in the Concurrent List before 2016 — a deliberate design to prevent overlap. Article 246A, inserted by the Constitution (One Hundred and First Amendment) Act, 2016, created the first concurrent taxing power, empowering both Parliament and State legislatures to levy GST.
Direct versus indirect taxes
Indian taxes fall into two families. Direct taxes — borne by the person on whom they are levied — comprise personal income tax and corporate tax (governed by the Income-tax Act, 1961), plus securities transaction tax. The Estate Duty (abolished 1985), Wealth Tax (abolished by the Finance Act, 2015) and Gift Tax are historical instances candidates must recall. Indirect taxes — passed on to the consumer — were historically a patchwork of central excise, service tax, customs, VAT, octroi and entry tax; GST subsumed most of these in 2017.
The distinction matters for tax buoyancy and progressivity. Direct taxes are progressive (rates rise with income); indirect taxes are regressive (the poor pay the same rate on consumption). India's tax-to-GDP ratio — roughly 11–12% at the central level and around 17–18% for general government — remains low against OECD averages near 34%, a recurring Mains theme on resource mobilisation.
Customs and the surviving non-GST levies
GST did not swallow everything. Basic Customs Duty survives under the Customs Act, 1962 and Customs Tariff Act, 1975, alongside the IGST levied on imports. Crucially, five petroleum products (crude, petrol, diesel, ATF, natural gas), alcohol for human consumption, and electricity remain outside GST — taxed by the older excise-plus-VAT structure. Stamp duty and property tax also remain with States and local bodies. These carve-outs are high-yield Prelims facts: a question asking "which of the following is outside GST?" appears repeatedly.
The reform arc
The trajectory runs from the Kelkar Task Force (2002–03) recommending a comprehensive GST, through the Vijay Kelkar 13th Finance Commission push, the Constitution (122nd Amendment) Bill, 2014, to the 101st Amendment and the rollout at midnight on 1 July 2017. On direct taxes, the Direct Taxes Code drafts, the 2019 corporate tax cut (to 22% for existing firms, 15% for new manufacturers via Section 115BAA/115BAB), and faceless assessment (2020) are the modern milestones examiners reward candidates for naming.