Tax System
Tax System
⇒ A compulsory contribution given by a citizen or organisation to the Government is called Tax, which is used for meeting expenses on welfare work.
⇒ Tax imposing and Tax collecting is at three levels in India- Central level, State level and Local level.
⇒ The distribution of tax between Centre and State has been clearly mentioned in the provisions of Indian Constitution. For rationalising it from time to time, Finance Commission has been constituted.
Aaykar Setu
⇒ With the objective to enhance tax payer services and mobile access experience, a mobile app (available on Android / iOS platform) and responsive version of the Tax Payer Services (TPS) section at the national website called “Aaykar Setu” was launched in 2017. “Aaykar Setu” would facilitate the online payment of the taxes, calculation information about the TPS hierarchy, ASK IT module, Tax Gyan, TDS/TRACES and other features. [Source: INDIA 2021]
⇒ The tax system has been divided into two parts:
Tax by Central Government: Custom Duty, Income Tax and Corporate Tax etc.
Tax by State Government: The state government has right to collect all the taxes in this category and to spend them.
⇒ There are two types of taxes: 1. Direct Taxes 2. Indirect Taxes.
* Direct Taxes The taxes levied by the central government on incomes and wealth are important direct taxes. The important taxes levied on incomes are corporation tax and income tax. Taxes levied on wealth are wealth tax, gift tax etc.
* Indirect Taxes: This type of tax is not paid by someone to the authorities and it is actually passed on to the other in the form of increased cost. They are levied on goods and services produced or purchased. Excise Tax, Sales Tax, Vat, Entertainment Tax are indirect taxes. The main forms of indirect taxes are customs and excise duties and sales tax. The central government is empowered to levy customs and excise duties (except on alcoholic liquors and narcotics) whereas sales tax is the exclusive jurisdiction of the state governments.
⇒ However, the union excise duties form the most significant part of central taxes. The major tax revenue sources for states are their shares in union excise duties and income tax, commercial taxes, land revenue, stamp duty, registration fees, state excise duties on alcohol and narcotics etc. Sales tax forms the most important component of commercial taxes.
⇒ Progressive Tax A tax that takes away a higher proportion of one’s income as the income rises is known as progressive tax. Indian Income Tax is a progressive and direct tax.
⇒ R. Chelliah Committee was constituted in August, 1991 for suggesting reforms in Tax Structure.
⇒ Chelliah Committee recommended Income Tax for agricultural income of more than 25,000 p.a. Chelliah Committee also recommended for lowering down the tax rates and reducing the tax slabs.
⇒ K.L. Rekhi Committee was constituted in 1992 for suggesting uniform regulations for indirect taxation (Custom Duty and Excise Duty).
Finance Commission
⇒ Finance Commission is a constitutional body, constituted by the President under Art. 280 of the constitution. Since Independence, 14 Finance Commissions have submitted their reports.
⇒ 1st Finance Commission was constituted under chairmanship of K. C. Neogi.
⇒ 12th Finance Commission was constituted under chairmanship of Dr. C. Rangarajan. The recommendations of 12th Finance Commission cover period 1st April, 2005 to 31st March, 2010.
⇒ 13th Finance Commission, for the period 2010-2015, had been constituted in November, 2007 with Dr. Vijay L. Kelkar as the Chairman.
⇒ The 14th Finance Commission, for the period 2015-2020, had been constituted on January 2, 2013 with Y. V. Reddy as the Chairman.
⇒ The 15th Finance Commission for the period 2020-25 has been constituted in November, 2017 with N.K. Singh as the Chairman.
Recommendations of 14th Finance Commission
* Under the 14th Finance Commission (FFC) award for the period 2015-20 grants to the tune of 2,00,292.20 crore are being devolved to Gram Panchayats in the country constituted under Part IX of the Constitution constituting an assistance of 488 per capita per annum at an aggregate level for 26 states to ensure stable flow of resources at regular intervals which will augment resources available with them to discharge their statutorily assigned functions.
* The grants are allocated and released to various states by Ministry of Finance (Department of Expenditure) in accordance with the guidelines issued by that Ministry.
* The states are to distribute the grants to Gram Panchayats as per the approved formula recommended in the latest State Finance Commission (SFC) report. However, in the absence of SFC formula, grant should be distributed using population of 2011 Census with a weight of 90% and area with a weight of 10%.
Important Taxes Imposed in India
⇒ Tax on Income and Wealth: The central government imposes different types of tax on income and wealth, viz. income tax, corporate tax, wealth tax and gift tax. Out of them income tax and corporate tax are more important from the revenue point of view.
⇒ Personal Income Tax : Personal income tax is generally imposed on an individual, combined Hindu families and total income of people of any other communities.
⇒ In addition to tax, separate surcharges are also imposed some times.
⇒ Agricultural income in India is free from income tax.
⇒ Corporate Tax : Corporate Tax is imposed on Registered Companies and Corporations.
⇒ The rate of corporate tax on all companies is equal. However, various types of rebates and exemptions have been provided.
Reforms In Tax Administration
The Government has consistently adopted reform measures aimed at the long term benefits of a more transparent, efficient and tax-payer friendly tax administration. A major step in this direction is the introduction of ‘Honoring the Honest’ platform. The platform for Transparent taxation-Honoring the Honest’ was launched in August 2020 with an objective to impart greater efficiency, transparency and accountability, and to eliminate physical interface between taxpayers and tax officers. The key features of the platform are (i) Usage of technology, data analytics and Artificial Intelligence and (ii) Recognizing taxpayers as partners in nation-building. The Platform stands on 3 pillars of tax administration reforms namely, Faceless assessment, Faceless appeal, and Taxpayers’ charter.
⇒ Custom Duties: As per the Constitutional provisions, the central government imposes import duty and export duty both. Import and Export duties are not only sources of income but with the help of it the central government regulates the foreign trade.
⇒ Import Duties: Generally import duties are ad-velorem in India. It means import duties are imposed on the taxable item on percentage basis.
⇒ Export Duties: Export Duties are more important, compared to Import Duties in terms of revenue and regulation of foreign trade.
⇒ Excise Duties: Excise duties are commodity tax as it is imposed on production of an item and it has no relevance with its sale. This is the largest source of revenue for the Central Government.
⇒ Except liquor, opium and other drugs, production of all the other items is taxable under Central Excise Duties.
⇒ One Coin and One Rupee note belong to ‘Legal Tender Money’ category.
⇒ M1 is known as Narrow Money.
⇒ M2 is known as Broad Money.
Goods and Services Tax
Legislative Development
⇒ The proposal to introduce a national level Goods and Services Tax (GST) was first mooted in 2006-07. The Goods and Services Tax Council was constituted in 2016.
⇒ The GST Council is deliberating on important GST issues, Central GST Bill, 2017; The Integrated GST Bill, 2017; The GST (Compensation to States) Bill, 2017.
⇒ GST was implemented in the country in July, 2017. Subsuming of various central indirect taxes and levies such as central excise duty, additional excise duties, excise duty levied under the medicinal and toilet preparations (excise duties) Act, 1955, Service Tax, Additional Customs Duty commonly known as Countervailing Duty, Special Additional Duty of Customs and Central Surcharges and Cesses so far as they relate to the supply of goods and services.
⇒ Levy of Integrated Goods and Services Tax on interstate transactions of goods and services. Coverage of all goods and services, except alcoholic liquor for human consumption, for the levy of goods and services tax. In case of petroleum and petroleum products, it has been provided that these goods shall not be subject to the levy till a date notified on the recommendation of the GST Council.
⇒ Compensation to the states for loss of revenue arising on account of implementation of the Goods and Services Tax for a period which may extend to five years.
Taxes being submerged into GST
Central level: a. Central Excise Duty, b. Additional Excise Duty, c. Service Tax, d. Additional Customs Duty commonly known as Countervailing Duty, and e. Special Additional Duty of Customs.
State level: (a) State Value Added Tax/Sales Tax, (b) Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), (c) Octroi and Entry tax, (d) Purchase Tax (e) Luxury tax and (f) Taxes on lottery, betting and gambling.
Follow on Facebook page – Click Here
Google News join in – Click Here
Read More Asia News – Click Here
Read More Sports News – Click Here
Read More Crypto News – Click Here