The tax system is divided between two governments. – Central and State. While the central government is responsible for collecting the direct and indirect tax both. The state government only collects the indirect tax. But what are these taxes???? 

Taxes by Central Government

  • Direct Tax- The central government monitors and imposes taxes on your Income. You give this tax directly to the central government and it is called income tax. This comes under the category of Direct taxes.
  • Indirect Tax - Central Government’s Indirect taxes are further divided into 3 sectors.

CGST – Central Goods and service tax 

While this tax has different slabs for different categories of goods, it still can be mainly divided into 4 major slabs: - 5%, 12%, 18%, 28%. The tax charged as per the goods slab onto the goods price is called GST. This is collected by the central government. BUT the important point to note here is – the central government only takes half of GST money and gives 50% to state government. (Crux – The GST paid by citizens is divided equally by both State and Central government on all goods and services.)

1. Excise    

Excise tax is charged over two things- Alcohol and Petroleum products. When you buy either of the two things you pay an excise tax of the product to the manufacturer which further goes to the central government. Every state has the same excise duty charges all over India as it is imposed by the central government. Though different products have different tax slabs.

2. Custom

Custom duty charges are applied over import and exportation of goods outside India. While import tax has many different slabs for different goods, the good news is there are NO EXPORT charges in India. The import duty custom tax is also collected by the central government.


The state government collects only indirect taxes. These indirect taxes are:-

  • VAT – Value Added Tax

Every state has different VAT charges. Only alcohol and petroleum products fall under the VAT charges. This tax is what makes the price difference between both products in every state. 

  • SGST – State Goods and Service Tax

The state government clearly says that they will abide by the rules of the central government regarding laws and slabs of GST. They receive half the amount of collected GST. 

The new tax code has made the tax collection simple and cleaner so that the government can maintain a clean business and income scale in the country. The tax slabs are easily available on the internet of every product. The sellers and manufacturers are law bounded to charge only the said tax and nothing else.    

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