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Taxation |
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An aspect of fiscal policy |
Taxes in India are levied by the Central Government and the state governments.[1] Some minor taxes are also levied by the local authorities such as the Municipality.[2]
The authority to levy a tax is derived from the Constitution of India which allocates the power to levy various taxes between the Central and the State. An important restriction on this power is Article 265 of the Constitution which states that "No tax shall be levied or collected except by the authority of law".[3] Therefore, each tax levied or collected has to be backed by an accompanying law, passed either by the Parliament or the State Legislature. In 2015-2016, the gross tax collection of the Centre amounted to ₹14.60 trillion (US$170 billion).[4]
Main article: History of taxation in India |
India has abolished multiple taxes with passage of time and imposed new ones. Few of such taxes include inheritance tax,[5] interest tax, gift tax, wealth tax, etc. Wealth Tax Act, 1957 was repealed in the year 2015.[6]
Direct Taxes in India were governed by two major legislations, Income Tax Act, 1961 and Wealth Tax Act, 1957. A new legislation, Direct Taxes Code (DTC), was proposed to replace the two acts.[when?][7] However, the Wealth Tax Act was repealed in 2015 and the idea of DTC was dropped.[citation needed]
Main article: Service Tax |
It is a tax levied on services provided in India, except the State of Jammu and Kashmir. The responsibility of collecting the tax lies with the Central Board of Excise and Customs(CBEC). From 2012, service tax is imposed on all services, except those which are specifically exempted under law(e.g. Exempt under Negative List, Exempt as exclusion from Service definition as per Service Tax, Exempt under MEN(Mega exemption notification)). In budget presented for 2008-2009, it was announced that all small service providers whose turnover does not exceed ₹10 lakh (US$12,000) need not pay service tax. Service tax at a rate of 14 percent(Inclusive of EC & SHEC) will be imposed on all applicable services from 1 June 2015.[8] From 15 November 2015, Swacch Bharat cess of 0.5% has been added to all taxable service leading the new Service Tax rate to be 14.5 percent (Inclusive of EC, SHEC & Swacch Bharat cess).[9] On 29 February 2016, Current Finance Minister Mr. Arun Jaitley announces a new Cess, Krishi Kalyan Cess that would be levied from 1 June 2016 at the rate of 0.5% on all taxable services. The purpose of introducing Krishi Kalyan Cess is to improve agriculture activities and welfare of Indian farmers. Thus, the new Service Tax rate would be 15% incorporating EC, SHEC, Swachh Bharat Cess and Krishi Kalyan Cess.[10]
From 2015 to currently, the gross tax collection of the Centre from service tax has amounted in excess of ₹2.10 trillion (US$25 billion).[11]
In 2015-2016, the gross tax collection of the Centre from excise amounted to ₹2.80 trillion (US$34 billion).[11]
In the 2016 Union budget of India, an excise of duty of 1% without |date=4 March 2016 ))</ref> The government had earlier proposed an excise duty in the Budget 2011-12, which had to be rolled back after massive protests by jewellers.[13]
Article 246[16] of the Indian Constitution, distributes legislative powers including taxation, between the Parliament of India and the State Legislature. Schedule VII enumerates these subject matters with the use of three lists:[17]
Separate heads of taxation are no head of taxation in the Concurrent List (Union and the States have no concurrent power of taxation).[18] The list of thirteen Union heads of taxation and the list of nineteen State heads are given below:[18]
S. No. | Parliament of India |
---|---|
1 | Taxes on income other than agricultural income (List I(Union List), Entry 82) |
2 | Duties of customs including export duties (List I(Union List), Entry 83) |
3 | Duties of excise on tobacco and other goods manufactured or produced in India except (i) alcoholic liquor for human consumption, and (ii) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in (ii). (List I(Union List), Entry 84) |
4 | Corporation Tax (List I(Union List), Entry 85) |
5 | Taxes on capital value of assets, exclusive of agricultural land, of individuals and companies, taxes on capital of companies (List I(Union List), Entry 86) |
6 | Estate duty in respect of property other than agricultural land (List I(Union List), Entry 87) |
7 | Duties in respect of succession to property other than agricultural land (List I(Union List), Entry 88) |
8 | Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freight (List I(Union List), Entry 89) |
9 | Taxes other than stamp duties on transactions in stock exchanges and futures markets |
10 | Tax on sales or purchase of newspaper and advertisement theirin;<P.M. BAKSHI> |
11 | Taxes on sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce |
12 | Taxes on the consignment of goods in the course of inter-State trade or commerce |
13 | All residuary types of taxes not listed in any of the three lists of Seventh Schedule of Indian Constitution |
S. No. | State Legislate |
---|---|
1 | Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenues (List II, Entry 45) |
2 | Taxes on agricultural income (List II, Entry 46) |
3 | Duties in respect of succession to agricultural land (List II, Entry 47) |
4 | Estate Duty in respect of agricultural land (List II, Entry 48) |
5 | Taxes on lands and buildings (List II, Entry 49) |
6 | Taxes on mineral rights (List II, Entry 50) |
7 | Duties of excise for following goods manufactured or produced within the State (i) alcoholic liquors for human consumption, and (ii) opium, Indian hemp and other narcotic drugs and narcotics (List II, Entry 51) |
8 | Taxes on entry of goods into a local area for consumption, use or sale therein (see Value added tax) (List II, Entry 52) |
9 | Taxes on the consumption or sale of electricity (List II, Entry 53) |
10 | Taxes on the sale or purchase of goods other than newspapers (List II, Entry 54) |
11 | Taxes on advertisements other than advertisements published in newspapers and advertisements broadcast by radio or television (List II, Entry 55) |
12 | Taxes on goods and passengers carried by roads or on inland waterways (List II, Entry 56) |
13 | Taxes on vehicles suitable for use on roads (List II, Entry 57) |
14 | Taxes on animals and boats (List II, Entry 58) |
15 | Tolls (List II, Entry 59) |
16 | Taxes on profession, trades, callings and employments (List II, Entry 60) |
17 | Capitation taxes (List II, Entry 61) |
18 | Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling (List II, Entry 62) |
19 | Stamp duty (List II, Entry 63) |
Central Board of Excise and Customs (CBEC) is a part of the Department of Revenue under the Ministry of Finance, Government of India. It deals with the tasks of formulation of policy concerning levy and collection of Customs & Central Excise duties and Service Tax, prevention of smuggling and administration of matters relating to Customs, Central Excise, Service Tax and Narcotics to the extent under CBEC's purview. The Board is the administrative authority for its subordinate organizations, including Custom Houses, Central Excise and Service Tax Commissionerates and the Central Revenues Control Laboratory.[citation needed]
The CBEC is headed by CBEC Chairman and also comprises six members. The Chairperson holds the rank of Special Secretary to Government of India while the members rank of Additional Secretary to Government of India.[20]
In 2015-2016, the gross tax collection of the Centre amounted to ₹14.60 trillion (US$170 billion).[4][11]
Main article: Income tax in India |
Income Tax is a tax imposed on individuals or entities (taxpayers) that varies with respective income or profits (taxable income). Income tax generally is computed as the product of a tax rate times taxable income. The tax collected by Central Board of Direct Taxes for central government.
Main article: Goods and Services Tax (India) |
Goods and Services Tax is a indirect tax collected on supply of goods or service.
Custom Duty is a indirect tax for goods when import or export. When import goods import from outside in the tax known as import custom duty. we goods export to outside India is known as export custom duty. The tax collected by Central Board of Indirect Taxes and Customs.
Main article: Local Body Tax |
"Local Body Tax", popularly known by its abbreviation as "LBT", is the tax imposed by the local civic bodies of India on the entry of goods into a local area for consumption, use or sale therein.[22] The tax is imposed based on the Entry 52 of the State List from the Schedule VII of the Constitution of India which reads; "Taxes on the entry of goods into a local area for consumption, use or sale therein."[23] The tax is to be paid by the trader to the civic bodies and the rules and regulations of these vary amongst different States in India. The LBT is now partially abolished as of 1 August 2015.[24]
Property tax, or 'house tax,' is a local tax on buildings, along with appurtenant land, and imposed on Possessor (certainly, not true custodian of property as per 1978, 44th amendment of constitution). It resembles the US-type wealth tax and differs from the excise-type UK rate. The tax power is vested in the states and it is delegated by law to the local bodies, specifying the valuation method, rate band, and collection procedures. The tax base is the annual rental value (ARV) or area-based rating. Owner-occupied and other properties not producing rent are assessed on cost and then converted into ARV by applying a percentage of cost, usually six percent. Vacant land is generally exempt. Central government properties are exempt. Instead a 'service charge' is permissible under executive order. Properties of foreign missions also enjoy tax exemption without an insistence for reciprocity. The tax is usually accompanied by a number of service taxes, e.g., water tax, drainage tax, conservancy (sanitation) tax, lighting tax, all using the same tax base. The rate structure is flat on rural (panchayat) properties, but in the urban (municipal) areas it is mildly progressive with about 80% of assessments falling in the first two slabs.[25]