2. Introduction
What is Tax?
A tax is a mandatory financial charge or some other type of levy imposed upon a
taxpayer by a governmental organization in order to fund various public
expenditures.
A failure to pay, or evasion of resistance to taxation, is punishable by law.
3. WHAT IS A TAX?
Let us begin by understanding the meaning of tax. Tax is a fee charged by a government
on a product, income or activity.
There are two types of taxes . Direct taxes and indirect taxes.
If tax is levied directly on the income or wealth of a person, then it is a direct tax e.g.
income-tax, wealth tax.
If tax is levied on the price of a good or service, then it is called an indirect tax e.g. excise
duty, custom duty, service tax and sales tax or value added tax. In the case of indirect taxes,
the person paying the tax passes on the incidence to another person.
4. WHY ARE TAXES LEVIED?
The reason for levy of taxes is that they constitute the basic source of
revenue to the government. Revenue so raised is utilised for meeting
the expenses of government like defence, provision of education,
health-care, infrastructure facilities like roads, dams etc.
5. Types of tax
1. Direct tax
2. Indirect tax
1) Direct tax : A direct tax is a tax paid by a person on whom it is legally
imposed. In direct tax, the person paying and bearing tax is the same . It is
the tax on income and property .
2) Indirect tax : An indirect tax is a tax imposed on one person but partly or
wholly paid by another . In indirect tax, the person paying and bearing tax is
different. It is the tax on consumption or expenditures .
6. Types of Direct tax
1. Income tax
2. vehicle tax
3. Expenditure tax
4. Property tax
5. Interest tax
6. Gift tax etc.
7. OVERVIEW OF INCOME-TAX LAW IN
Income-tax is the most significant direct tax. In this material, we would
be introducing the students to the Income-tax law in India. The
income-tax law in India consists of the following components.
Income Tax Act
Annual Finance Acts
Income Tax Rules
Circulars/Notifications
Legal decisions of Courts
8. Income-tax Act
The levy of income-tax in India is governed by the Income-tax Act, 1961. We
shall briefly refer to this as the Act.
This Act came into force on 1st April, 1962.
The Act contains 298 sections and XIV schedules.
These undergo change every year with additions and deletions brought about
by the Finance Act passed by Parliament.
In pursuance of the power given by the Income-tax Act, rules have been framed
to facilitate proper administration of the Income-tax Act.
9. Types of indirect tax
1. Service tax
2. Excise duty
3. VAT
4. Customs duty
5. Securities Transaction tax (STT)
6. Stamp duty
7. Entertainment tax
10. Before GST the pattern of tax levy was
as follows:
Buying raw
materials
Manufacture
Final sale to
consumer
Sale to
wholesaler/
warehousing
Sale to
retailer
VAT
VAT+
excise duty
VAT
VAT
11. The pattern of tax under GST
GST will be levied on each of these stages.
Buying raw
materials
Manufacture
Final sale to
consumer
Sale to wholesaler/
Warehousing
Sale to retailer
12. What is goods and service tax?
Goods and services tax (GST) is an indirect tax which was introduced in India
on 1St July 2017 and was applicable throughout India which replaced
multiple cascading taxes levied by the central and state governments.
Goods and service tax is a tax on goods and services.
It is leviable at each point of sale or provision of service.
13. At the time of sale of goods or providing the services the seller or
service provider can claim the input credit of tax which he has paid
while purchasing the goods or procuring the service.
This is simply very similar to VAT.
It can be termed as national level VAT on goods and services.
Only difference in this system is that not only goods but also services
are involved.
The rate of tax on goods and services are generally the same.
14. GST: key features
Dual GST: central GST and state GST
Destination based state GST
Common base
Uniform classification
Uniform forms – Returns, challans etc
No cascading of central and state taxes
Cross credit between centre and state not allowed
Tax levied from production to consumption
16. GST
Central GST
Central excise duty
Additional excise duty
Service tax
Countervailing duty (CVD)
Additional duty of customs (ADC)
Surcharge, education and secondary
/higher secondary cess
State GST
VAT
Purchase tax
Entertainment tax
Luxury tax
Lottery tax
State surcharge and cesses leviable
on the above as of now
17. Taxes not included in GST
Stamp duty
Property tax
Toll tax
Electricity tax
18. Who are liable to pay GST?
Persons registered under GST and making taxable supplies under GST.
Persons registered under GST required to make payment of tax under
reverse charge mechanism.
E-commerce operators registered under GST and through whom
certain categories of notified supplies are made.
Persons registered under GST and required to deduct tax (TDS).
E-commerce operators registered under GST and required to collect
tax (TCS)
