Study this in the app →

English · हिन्दी · తెలుగు · தமிழ் · മലയാളം · मराठी · ಕನ್ನಡ

Quick recap: Taxation and GST on one page

Taxation and GST · Quick recap · Fact-checked on · how we check

Written with AI from the sources listed at the bottom of this page, then fact-checked by a separate AI.

Both parts of Taxation and GST condensed for quick revision: Article 265 and the types of taxes, taxing powers in the Seventh Schedule, income and corporation tax, cesses and surcharges, the 101st Amendment, CGST, SGST and IGST, the GST Council, GST 2.0 and compensation, with a one-table overview and eight mixed questions.

Taxes are the largest of the Union's revenue receipts. Part 1 of this chapter set out the principles and the main Union taxes; Part 2 explained the Goods and Services Tax. This recap puts both on one page.

A tax is a compulsory payment with no specific return, and Article 265 forbids any tax without the authority of law. A good tax is equitable, certain, convenient and cheap to collect. A progressive tax rate rises with income; a regressive tax weighs more on the poor. A direct tax is borne by the person who pays it, such as income or corporation tax; an indirect tax is passed on to the buyer, such as GST, customs or excise. A rising share of direct taxes is usually read as a sign of a fairer system.

The Seventh Schedule decides who taxes what: the Union taxes non-agricultural income, company profits, imports and excise on goods outside GST; the States tax agricultural income, land and buildings, liquor and the sale of petroleum products; residuary taxes belong to Parliament, and Article 276 caps professions tax at ₹2,500 a year. Income tax now runs on the Income-tax Act, 2025, in force from 1 April 2026 with a single tax year; the new regime is the default and, after the Budget 2025-26, leaves income up to ₹12 lakh tax-free for resident individuals. Corporation tax was cut in 2019 to 22 per cent, or 15 per cent for new manufacturing companies, outside MAT. Wealth tax (2015), dividend distribution tax (2020) and the equalisation levies (2024 and 2025) have ended.

A surcharge is a tax on a tax (Article 271) and a cess is a tax for a stated purpose, such as the 4 per cent Health and Education Cess; both stay with the Union, outside the divisible pool of Article 270. Tax buoyancy measures how revenue grows with GDP including policy changes, elasticity excludes them, and GAAR, in force from 1 April 2017, targets arrangements made mainly to avoid tax.

Before GST, separate Union and State taxes with no cross-credit caused tax on tax. The 101st Amendment (assent 8 September 2016) inserted Article 246A (both levels make GST laws; Parliament alone for inter-State supply), Article 269A (IGST) and Article 279A (the Council), and defined GST in Article 366(12A) to exclude alcoholic liquor for human consumption. GST began on 1 July 2017 as a dual, destination-based tax: CGST and SGST within a State, Integrated Goods and Services Tax between States and on imports, with input tax credit so that tax falls only on value added. Five petroleum products await a Council date, electricity is outside, and tobacco bears GST plus excise.

The GST Council, chaired by the Union Finance Minister, decides by three-fourths of weighted votes, the Union holding one-third and the States two-thirds; in Mohit Minerals (2022) its recommendations were held persuasive, not binding. Rates of 5, 12, 18 and 28 per cent gave way under GST 2.0, from 22 September 2025, to 5 and 18 per cent plus 40 per cent for select goods. States were promised 14 per cent annual growth over 2015-16 for five years to June 2022, paid from a GST compensation cess that was extended to March 2026 to repay pandemic loans and ended on tobacco on 1 February 2026. GST built one national market but narrowed the States' own taxing power, which is why the Council is the centre of cooperative federalism in taxation.

Taxation and GST at a glance
LevyDirect or indirectLevied byShared with States?
Income tax (non-agricultural)DirectUnionYes, divisible pool (Art 270)
Corporation taxDirectUnionYes, divisible pool
Customs dutyIndirectUnionYes, divisible pool
Surcharge (Art 271) and cessAdd-ons to taxesUnionNo
CGSTIndirectUnionYes, divisible pool
SGSTIndirectStateKept by the State
IGSTIndirectUnionDivided under Art 269A
Tax on agricultural income; excise on liquorDirect; indirectStateKept by the State

Exam traps

Recap

Practice questions

Q1. Which one of the following is an indirect tax?

  1. Corporation tax
  2. Personal income tax
  3. Customs duty
  4. Securities transaction tax
Show answer

Answer: C. Customs duty

Customs duty is paid by the importer but passed on to buyers in the price, so it is indirect. Corporation tax, personal income tax and securities transaction tax fall on the person who pays them and are direct taxes.

Q2. Consider the following statements:
1. Under Article 276, a State may levy a tax on professions of up to ₹2,500 a year per person.
2. Taxes on agricultural income are levied by Parliament.
Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
Show answer

Answer: A. 1 only

Statement 1 is correct. Statement 2 is wrong: taxes on agricultural income are in the State List, so States levy them. Hence '2 only', 'both' and 'neither' are wrong.

Q3. The Health and Education Cess levied on income tax is:

  1. Shared with the States through the divisible pool
  2. Kept by the Union, outside the divisible pool
  3. Levied by the States and collected by the Union
  4. Part of the Goods and Services Tax
Show answer

Answer: B. Kept by the Union, outside the divisible pool

Article 270 excludes cesses from the divisible pool, so the Union keeps the Health and Education Cess. It is not shared, it is a Union levy rather than a State one, and as a cess on income tax it has nothing to do with GST.

Q4. Consider the following statements about the Income-tax Act, 2025:
1. It came into force on 1 April 2026.
2. It uses a single 'tax year' in place of the 'previous year' and 'assessment year'.
Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
Show answer

Answer: C. Both 1 and 2

Both statements are correct: the Income-tax Act, 2025, passed by Parliament in August 2025, replaced the Income-tax Act, 1961 from 1 April 2026 and introduced a single tax year. The options leaving out either statement, or both, are therefore wrong.

Q5. Under GST, a supply of goods from Maharashtra to Gujarat attracts:

  1. CGST and SGST of Maharashtra
  2. IGST
  3. SGST of Gujarat only
  4. Central sales tax
Show answer

Answer: B. IGST

An inter-State supply attracts IGST, levied and collected by the Union under Article 269A. CGST plus SGST applies only within a State, Gujarat's SGST alone is never charged on such a supply, and central sales tax was subsumed in GST.

Q6. Consider the following statements about the GST Council:
1. It is chaired by the Union Finance Minister.
2. Its recommendations are binding on State legislatures.
3. The States together hold two-thirds of the weighted votes cast.
Which of the statements given above are correct?

  1. 1 and 2 only
  2. 1 and 3 only
  3. 2 and 3 only
  4. 1, 2 and 3
Show answer

Answer: B. 1 and 3 only

Statements 1 and 3 are correct. Statement 2 is wrong: in Mohit Minerals (2022) the recommendations were held persuasive, not binding. Every option including statement 2 is therefore wrong.

Q7. Match List I with List II:
List I (Event) — List II (Date)
A. GST comes into force — 1. 8 September 2016
B. President's assent to the 101st Amendment — 2. 1 July 2017
C. GST 2.0 rates take effect — 3. 30 June 2022
D. Compensation guarantee period ends — 4. 22 September 2025
Select the correct answer using the code given below:

  1. A-2, B-1, C-4, D-3
  2. A-1, B-2, C-4, D-3
  3. A-2, B-1, C-3, D-4
  4. A-2, B-4, C-1, D-3
Show answer

Answer: A. A-2, B-1, C-4, D-3

GST began on 1 July 2017, the President assented to the 101st Amendment on 8 September 2016, GST 2.0 rates applied from 22 September 2025, and the compensation guarantee ended on 30 June 2022. The second code swaps the start of GST and the assent, the third swaps GST 2.0 and the end of compensation, and the fourth misplaces the assent and GST 2.0.

Q8. Which one of the following best describes 'tax buoyancy'?

  1. The response of tax revenue to GDP growth, including the effect of policy changes
  2. The response of tax revenue to GDP growth, excluding the effect of policy changes
  3. The share of direct taxes in gross tax revenue
  4. Revenue given up through tax exemptions
Show answer

Answer: A. The response of tax revenue to GDP growth, including the effect of policy changes

Buoyancy measures how tax revenue responds to GDP growth with policy changes included. The version without policy changes is tax elasticity, the share of direct taxes is a different indicator, and revenue given up through exemptions is tax expenditure.

← Part 2All parts

Study this in the Upscore app to keep notes, save it for revision, track your practice scores and follow a plan to the exam date. It's free.

Study this in the app →

Sources