Question map
The sales tax you pay while purchasing a toothpaste is a
Explanation
Sales tax is both imposed and collected directly by the State Governments.[2] In the pre-GST era (before 2017), which includes 2014 when this question was asked, Value Added Tax (VAT) was imposed on the sale of goods within the state[3], and the Central government could not impose taxes on sale of goods within the state.[4] When you purchased toothpaste from a shop in 2014, it was an intra-state sale of goods, which fell under the state's taxation jurisdiction. The state government had the constitutional power to levy and collect this tax. It's important to note that Central Sales Tax (CST) was levied by the Centre on sale of goods from one state to another but the tax proceeds were collected and kept by the origin state[4], but this applied only to inter-state transactions, not regular retail purchases within a state.
Sources- [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Global Minimum Corporate Tax (GMCT): > p. 172
- [4] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Global Minimum Corporate Tax (GMCT): > p. 172
PROVENANCE & STUDY PATTERN
Full viewThis is a classic 'Applied Polity' question. It tests your grasp of the 7th Schedule (Division of Powers) by converting a dry constitutional entry into a real-world transaction. It is a fundamental check on whether you understand Fiscal Federalism beyond just memorizing Article numbers.
This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.
- Statement 1: In India in 2014, was the sales tax charged when purchasing toothpaste a tax imposed by the Central Government?
- Statement 2: In India in 2014, was the sales tax charged when purchasing toothpaste a tax imposed by the Central Government but collected by the State Government?
- Statement 3: In India in 2014, was the sales tax charged when purchasing toothpaste a tax imposed by the State Government but collected by the Central Government?
- Statement 4: In India in 2014, was the sales tax charged when purchasing toothpaste imposed and collected by the State Government?
- Explicitly states VAT was imposed on sale of goods within the state and that the Central Government could not impose taxes on sale of goods within the state.
- Distinguishes Central Sales Tax (CST) as levied by Centre only on inter‑state sales, implying retail intra‑state purchases (like toothpaste) attract state tax.
- Constitutional distribution of financial powers notes Parliament’s competence is limited to taxing sales 'in the course of inter‑State trade and commerce' (Entry 92A, List I).
- By contrast, sales within a state are not under exclusive central taxing power, supporting that intra‑state sales tax is not a central levy.
- Lists Central Taxes versus State Taxes and shows State VAT/Sales Tax as a state subject (separate from central taxes).
- Reinforces that sales tax/VAT on goods sold within a state is a state, not central, taxation matter.
- Directly addresses the exact quiz-style claim about sales tax on toothpaste.
- Explicitly states that sales tax is both imposed and collected by State Governments, which contradicts the statement.
- Affirms that the sales tax on toothpaste is 'primarily a tax imposed and collected by the state government'.
- Reinforces that the Central Government did not impose (or solely impose) that sales tax, countering the statement.
Explains Central Sales Tax (CST) was levied by the Centre on inter‑state sales while proceeds were collected/kept by the origin state (origin‑based tax).
A student could use this to check whether the toothpaste sale was inter‑state (CST) or intra‑state (VAT/sales tax), and so judge whether a Centre‑levied/State‑collected rule applied.
States that under Article 269 certain taxes on sale/purchase of goods in the course of inter‑state trade are levied and collected by the Centre but assigned to States.
A student could determine if the toothpaste transaction was 'in the course of inter‑state trade' to see if Article 269 type treatment applied.
Sets the constitutional rule that taxation of sales 'in the course of inter‑State trade and commerce' is Parliament's exclusive competence; sales within a State are subject to State taxation.
One can classify a toothpaste purchase as intra‑state (likely) to infer it would fall under State‑imposed VAT/sales tax rather than a Centre levy.
Lists major State taxes (VAT/Sales Tax) as being levied by States on sale of goods within the State; these were later subsumed into GST.
Use the typical classification (toothpaste sale = sale of goods within a state) to infer it was normally a State‑levied sales tax in 2014, not a Centre levy collected by States.
Presents the exact exam-style question wording: 'The sales tax you pay while purchasing a toothpaste is a (a) tax imposed by the Central Government.' indicating this topic was treated as a testable distinction.
A student could recall the typical correct answer from such practice items (combined with the constitutional/ tax rules above) to suspect the tax was not a Centre‑imposed one.
- Directly states the claim is incorrect.
- Explains sales tax is both imposed and collected by State Governments.
- Affirms that sales tax on toothpaste is imposed and collected by the state government.
- Corroborates refutation of the claim that the Centre collects this tax.
Explains VAT was imposed on sale of goods within a state (Centre could not impose taxes on sale within the state) and describes Central Sales Tax (CST) as levied by Centre on inter-state sales with proceeds kept by origin state.
A student could use this rule plus the fact that most retail toothpaste purchases are intra-state to infer the tax would be a state levy (VAT/sales tax) and not a central collection.
Gives constitutional rule: power to tax sales in course of inter-state trade is with Parliament; otherwise State taxation has restrictions.
By determining whether a toothpaste sale was intra- or inter-state in 2014, a student can apply this distribution of taxing powers to judge which level imposed the tax.
States Article 269 category: certain taxes are 'Levied and Collected by the Centre but Assigned to the States', e.g., taxes on sale or purchase of goods in course of inter-state trade.
A student could check whether the sale fell under 'in course of inter-state trade' in 2014; if not, this Article would not make the Central Government collect that particular tax.
Lists major State taxes pre-GST, including VAT/Sales Tax as a State levy (these were subsumed later into GST).
Knowing toothpaste was subject to state VAT/sales tax pre-GST, a student could infer the tax was primarily a state levy (and typically administered by the state).
Contains an exam-style prompt asking 'The sales tax you pay while purchasing a toothpaste is a …' indicating this is a standard question about which government imposes that tax.
A student could look up the completed question/answer in such kits or recall standard prelim answers that sales tax on retail goods is a state-imposed tax to inform judgement.
- Explicitly states Value Added Tax (VAT) was imposed on the sale of goods within the state.
- Says the Central government could not impose taxes on sale of goods within the state, implying states levy such taxes on intra-state sales.
- Explains the distribution of financial powers and distinguishes sales in the course of inter-state trade (parliament's domain) from other sales.
- By assigning inter-state sales to Parliament, it implies ordinary (intra-state) sales taxation falls to states.
- States constitutional restrictions and examples showing states can impose taxes on certain local activities while being prohibited for supplies outside the state.
- Reinforces that states have the power to tax supplies within the state (i.e., typical retail sales like toothpaste).
- [THE VERDICT]: Sitter. Directly solvable using M. Laxmikanth (Chapter: Centre-State Relations) or any basic Indian Economy NCERT.
- [THE CONCEPTUAL TRIGGER]: The 7th Schedule of the Constitution (List I vs List II) and the pre-GST Indirect Tax structure.
- [THE HORIZONTAL EXPANSION]: Memorize the 'Who Levies, Who Collects, Who Keeps' matrix: (1) Stamp Duty (Art 268): Levied by Centre, Collected/Kept by State. (2) Income Tax: Levied/Collected by Centre, Shared. (3) Sales Tax (Pre-GST): Levied/Collected by State. (4) Inter-state Trade (CST): Levied by Centre, Collected/Kept by State (Art 269).
- [THE STRATEGIC METACOGNITION]: Do not study taxes in isolation. Always ask: 'If I buy this item, which government gets the money?' Apply constitutional entries to daily objects (Toothpaste = State VAT; Share Market transaction = Centre STT; Newspaper = Centre).
References distinguish VAT as the tax on sales within a state and CST as the Centre’s levy on inter‑state sales — directly relevant to whether toothpaste purchase attracts a central tax.
High‑yield for UPSC questions on indirect taxes: explains which level of government taxes retail sales, helps answer pre‑GST tax allocation queries, and is often tested in polity‑economy overlap questions. Prepare by memorising which taxes were state/central pre‑GST and practising scenario questions (intra‑ vs inter‑state).
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Global Minimum Corporate Tax (GMCT): > p. 172
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Details about GST > p. 92
D. D. Basu excerpt shows Parliament’s power is limited to inter‑state sales, clarifying central vs state competence for sales tax.
Essential for UPSC polity and economy linkage: constitutional entries determine fiscal federalism and are frequently asked in static and application questions. Study entries in Lists I–III with examples (sales, customs, excise) and practice applying them to fact patterns.
- Introduction to the Constitution of India, D. D. Basu (26th ed.). > Chapter 25: DISTRIBUTION OF FINANCIAL POWERS > DISTRIBUTION OF FINANCIAL POWERS > p. 384
Multiple references list central levies (excise, service tax, CST) versus state levies (VAT/sales tax), framing how indirect taxes were allocated in 2014.
Useful for comparing pre‑ and post‑GST regimes — a recurrent UPSC theme. Master by tabulating taxes by authority (Centre/State), noting exceptions, and practising timeline‑based questions (what applied in 2014 vs after GST).
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Global Minimum Corporate Tax (GMCT): > p. 172
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Details about GST > p. 92
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Goods and Services Tax (GST): > p. 174
References distinguish CST (centre-levied on inter-state sales; origin-based) from VAT/sales tax (levied on sale of goods within a state). This directly relates to who imposes and who collects sales taxes on goods like toothpaste.
High-yield for UPSC: questions often probe which level of government can tax particular kinds of sales (inter-state vs intra-state). Understanding CST vs VAT clarifies past (pre-GST) indirect tax structure and aids answers on tax incidence and assignment. Prepare by comparing textbook definitions and examples (inter-state sale vs in-state retail sale) and practice applying them to fact patterns.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Global Minimum Corporate Tax (GMCT): > p. 172
- Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 83
Constitutional allocation (entries and limits) determines whether the Centre or a State may impose taxes on sales and purchases within or across states — central to the statement's claim.
Core polity concept frequently tested: knowing Entries (List I vs List II) and limits on taxing inter-state/intra-state sales helps answer constitutional and federal finance questions. Study by mapping key entries (sales in course of inter-state commerce) and practising scenario-based MCQs to identify taxing authority.
- Introduction to the Constitution of India, D. D. Basu (26th ed.). > Chapter 25: DISTRIBUTION OF FINANCIAL POWERS > DISTRIBUTION OF FINANCIAL POWERS > p. 384
- Indian Polity, M. Laxmikanth(7th ed.) > Chapter 15: Centre-State Relations > B. Taxes Levied and Collected by the Centre but Assigned to the States (Article 269): The following taxes fall under this category: > p. 153
Article 269 category explains situations where the Centre levies/collects a tax but proceeds are assigned to states — relevant when asking if a tax can be 'imposed by Centre but collected by State'.
Practically useful for UPSC prelims and mains: many questions hinge on which taxes are levied/collected by Centre but assigned to states (and why). Master Article 269 provisions, typical examples, and implications for Consolidated Fund accounting; use Laxmikanth and constitutional text with examples for revision.
- Indian Polity, M. Laxmikanth(7th ed.) > Chapter 15: Centre-State Relations > B. Taxes Levied and Collected by the Centre but Assigned to the States (Article 269): The following taxes fall under this category: > p. 153
- Laxmikanth, M. Indian Polity. 7th ed., McGraw Hill. > Chapter 15: Centre State Relations > B. Taxes Levied and Collected by the Centre but Assigned to the States (Article 269): The following taxes fall under this category: > p. 153
Distinguishes taxes on sales within a state (VAT/sales tax, levied by states) from taxes on inter‑state sales (CST, a central levy). This directly relates to who imposes/collects tax on a toothpaste purchase made within a state.
High‑yield for UPSC prelims/interview: questions often test which government levies/collects specific indirect taxes and the intra‑ vs inter‑state distinction. Links to taxation, federal fiscal relations and indirect tax reforms. Learn by comparing examples (toothpaste = intra‑state sale) and memorising which taxes were state vs central pre‑GST.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Global Minimum Corporate Tax (GMCT): > p. 172
- Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 83
The 'Newspaper' Trap: While sales tax on goods (like toothpaste) is a State subject (Entry 54, List II), taxes on the sale or purchase of NEWSPAPERS and on advertisements published therein are exclusively a Union subject (Entry 92, List I).
Administrative Feasibility Logic: Imagine the Central Government in Delhi trying to monitor and collect tax from every small 'kirana' shop selling toothpaste in a remote village. It is administratively impossible. Local trade taxes are logically devolved to States for effective collection.
Mains GS-2 (Federalism): This pre-GST fragmentation explains why the 101st Amendment (GST) was a massive surrender of State fiscal autonomy. States lost their exclusive right to tax 'toothpaste' (Entry 54), leading to current debates on GST Compensation.