Viral Graphic Comparing UPA and NDA Govt Taxes on Commodities Is Misleading

Prior to the introduction of GST, there was no uniform taxation policy. VAT varied from one state to another.

A graphic comparing tax rates on a slew of goods and services between the Manmohan Singh-led United Progressive Alliance (UPA) government and Narendra Modi National Democratic Alliance (NDA) regime is being widely shared on social media.

It lists various products like sanitary napkins, fertilisers, television sets, and restaurants, among others, and shows a clear drop in taxes on all the items under Modi's leadership.

However, the comparison is misleading as before GST, there was no uniform taxation policy. The Value Added Tax (VAT) was introduced in 2005 and the tax rates were different from one state to another.

Under VAT, taxes were added to goods or services at each point that added value to the item, until sale.

Since the implementation of the Goods and Services Tax (GST) in 2017, goods, services, and commodities have been put under uniform taxation across the country.

Commenting on this comparison, Deepanshu Mohan, Associate Professor and Director, Centre for New Economics Studies, Jindal School of Liberal Arts and Humanities said, "Making any linear or one-to-one sort of comparison between both the taxes might be unfair."

CLAIM

The graphic lists the tax levied on various goods and compares the rates between the UPA era and the NDA government. The text, along with the graphic reads, "जीएसटी को गब्बर सिंह टैक्स कहने वाले, ये अंतर नही बताएंगे। "

[Translation: Those calling GST the Gabbar Singh Tax, will not show you this difference.]

The graphic is viral on Facebook.

Archives of social media posts sharing the same graphic can be seen here and here.

The Quint received several queries about this on its tipline number.

WHAT WE FOUND

On 1 April 2005, the Value Added Tax (VAT) was added to the Indian taxation system.

VAT is an indirect consumption tax levied on goods at each point in the supply chain that added value to the commodity, from manufacturing to end-user sales.

Since its introduction, VAT replaced Sales Tax and was introduced at the state level. This meant that different states had different tax rates and rules.

Using VAT as a tax system meant that price of a bottle of mineral water, for instance, would vary from one state to another due to difference in taxation.

But this does not mean that VAT was the only "tax on tax" price that was added to a product.

For interstate products, the central government imposed CST or Central Sales Tax, which was collected and kept in the state where it was received.

Therefore, for product that was sold across states, the common man paid VAT, as well as CST. VAT did not completely eradicate the Sales Tax.

GOODS AND SERVICES TAX,  2017

In 2017, the government announced the implementation of a unified system on tax percentages on goods and services, called the Goods and Services Tax (GST).

GST works to segregate all good and services into different tax slabs.

Under GST, the same rate of tax would be levied on a particular item or service across the country, resulting in uniform nationwide taxation.

GST aimed at eliminating the cascading effect of tax on tax system that preceded it.

WHAT ABOUT THE COMPARISON SHOWN IN THE GRAPHIC?

To put it simply, VAT cannot be compared to GST, by virtue of it being varied across states.

"VAT has a very different product value addition, composition, and process of imposing taxes as compared to GST. So, GST is mostly levied at the end of the final price computation," Mohan told The Quint.

He further said, "While we can make comparison by the way of GST and VAT as two forms of similar indirect taxes, but the processes or the mechanisms by which each of these are imposed are very different."

While it's true that the tax on certain products did reduce after the introduction of GST, but to compare it with the pre-GST rates of just some products is selective and misleading.

For instance, as per the revised GST rates, pre-packaged wheat will attract 5 percent tax, but pre-GST, the tax on wheat was 2.5 percent. This isn't mentioned anywhere in the graphic.

Similarly, curd, lassi, and butter milk were attracting a tax of 4 percent before GST, and they will now be taxed at 5 percent. But again, this is not mentioned in the graphic.

It is not feasible to analyse the values of taxation provided in the graphic, point by point, as the nature of the two taxes is fundamentally different.

Therefore, the information provided in the graphic, which attempts to take a dig at the Dr Manmohan Singh-led UPA government, is misleading.

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