Partial preview of the text
Download Indirect Tax in India and more Exams Trade and Commerce in PDF only on Docsity!
CONCEPT OF INDIRECT TAX IN INDIA
CONCEPT OF INDIRECT TAX IN INDIA Taxation is one of the essential and decisive elements in the working of machinery of a Nation. It forms a quintessential part of development of any country. The revenue that is collected in the form of taxes is used for providing goods and services for public utility such as infrastructure, transportation, facilities like rain shelters and common areas, sanitation and all other such amenities which are provided by the government of the country. A tax can be said to be a non-penal, yet compulsory transfer of resources from the private to the public sector levied on the basis of a predetermined criteria. Taxes are collected for serving the primary purpose of providing sufficient revenues to the State and have become a mechanism through which the social and economic objectives of a welfare state could be achieved. Every amount that is collected is contributed towards providing better infrastructure facilities for public at large. The same is also utilized towards rural revival and social well- being of general public. Taxation system is instrumental in removing poverty and inequality from the society. On the other hand, tax reform is fundamental equipment in strategy development aiming at holistic growth of the society. Thus, the importance of an efficient tax system and reforms in tax system cannot be undermined. There are two types of taxes levied in India, i.e., Direct tax, which is levied directly on income, profession, etc, of an individual and where the tax burden cannot be passed on to any other person. Indirect tax, on the other hand, is not paid on the direct income of an individual person but is levied indirectly on the ultimate consumer of goods and services for consumption of goods and services. Hence, the former is levied on the income while latter is levied on the goods and services. In indirect taxes, immediate burden is on one person and ultimate burden is on some other person i.e., the person who ultimately consumes. Goods and Services Tax (GST) was rolled out in India with effect from 1st July, 2017. GST is one of the greatest tax reforms in India. It transforms the system of taxation and tax administration into a digital world by adopting the latest information technology. With the introduction of GST, India has joined the club of developed and progressing Nations which are already having a common tax on goods and services. Following are some of the distinctions between direct and indirect taxes : DIRECT TAXES INDIRECT TAXES These are mainly on income, wealth, profession etc. | These are consumption based taxes on goods and of persons services Tax payer pays taxes directly to government Tax payer pays taxes indirectly through intermediaries like importers , suppliers etc. Direct taxes become payable after the benefit/ income | Indirect taxes are payable even before the goods/ reaches the tax payer services reach the tax payer. Income tax, corporation tax are main sources of direct | Customs and GST are major indirect taxes in India. tax Individuals, HUFs, firms and companies are the Tax | End-consumer of the goods and services bear the payers. final burden of tax. CONSTITUTIONAL POWERS OF TAXATION Constitution of India is the supreme law of India. It lays down the framework defining fundamental political principles, establishes the structure, procedures, powers and duties of government institutions and sets out fundamental rights, directive principles and the duties of citizens. Constitution of India thus lays down the foundation brick for arranging the powers, duties and the supremacy to legislate all laws of India. The authority to levy a tax is hence derived from the Constitution of India. Article 246 of the Indian Constitution, lays down three types of lists and distributes legislative powers including taxation, between the Parliament of India and the State Legislatures. It lays down the subject 
