The sales tax you pay while purchasing a toothpaste is a

Answer: (d) tax imposed and collected by the State Government

Sales tax on an ordinary sale within a State, such as buying toothpaste from a local shop, was a State subject. Entry 54 of the State List empowered State legislatures to tax such sales, so the State both levied and collected it. Sales in the course of inter-State trade belonged to the Union.

• ✗ (a) The Centre's power to tax the sale of goods (other than newspapers) extended to sales in the course of inter-State trade or commerce (Union List entry 92A). A local retail purchase of toothpaste is not an inter-State sale.
• ✗ (b) The Centre did not levy any tax on ordinary local sales, so there was no Central tax here for the State to collect.
• ✗ (c) This reverses the position. The tax on local sales was imposed by the State under entry 54 of List II, and the State's own tax machinery collected it.
• ✓ (d) In 2014, State List entry 54 read: 'Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I.' The State therefore imposed and collected sales tax (VAT) on goods like toothpaste.
• • Since then The Constitution (One Hundred and First Amendment) Act, 2016 introduced GST, which came into force in July 2017. VAT/sales tax has been subsumed in GST. Entry 54 now covers State taxes on the sale of only petroleum crude, high speed diesel, petrol, natural gas, aviation turbine fuel and alcoholic liquor for human consumption.

Remember · Before GST, intra-State sales tax (VAT) was a State tax under State List entry 54, levied and collected by the State. Taxes on inter-State sales came under Union List entry 92A.

📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter)

Question: UPSC Civil Services (Preliminary) 2014, General Studies Paper I. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). · Report an error