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Constitution- Taxation
Introduction The constitutional provisions relating to taxation in India are designed to ensure that both the Union and the States have the resources they need to function effectively, while also protecting the interests of taxpayers. Need for Constitutional Provisions Relating to Taxation The Constitution divides taxation powers between the Union and the States in a way that gives the Union government the power to levy taxes on a wider range of items than the States. This is because the Union government has a wider range of responsibilities, such as national defence and foreign affairs. Constitutional Provisions Relating to Taxation The constitutional provisions relating to taxation in India are contained in Articles 265 to 289 of the Constitution of India. Article 265 Article 265 of the Constitution of India states that no tax can be levied or collected except by the authority of law. This means that all taxes must be imposed by a valid law and that no tax can be levied or collected without the authority of law. Article 266 Article 266 of the Constitution of India deals with the Consolidated Funds and Public Accounts of India and the States. It states that the following shall form one consolidated fund to be entitled the Consolidated Fund of India: @The whole or part of the net proceeds of certain taxes and duties to States @All loans raised by the Government by the issue of treasury bills @All money received by the Government in repayment of loans @All revenues received by the Government of India @Loans or ways and means of advances Article 268 Article 268 of the Constitution of India deals with duties levied by the Union government but collected and claimed by the State governments. These duties include stamp duties, excise on
medicinal and toilet preparations, etc. These duties collected by states do not form a part of the Consolidated Fund of India but are with the state only. Article 269 Article 269 of the Constitution of India provides the list of various taxes that are levied and collected by the Union and the manner of distribution and assignment of Tax to States. These taxes include taxes on income other than agricultural income, taxes on corporation tax and duties of customs. Article 269(A) Article 269(A) of the Constitution of India was inserted by the 122nd Amendment of the Constitution in 2017. This article gives the power to collect goods and services tax (GST) on supplies in the course of inter-state trade or commerce to the Government of India. Article 270 Article 270 of the Constitution of India deals with the taxes levied and distributed between the Union and the States. It states that the following taxes are levied and collected by the Union government and the proceeds are distributed between the Union and the States in the following manner: All taxes and duties mentioned in the Union List, except the duties and taxes mentioned in Articles 268, 269 and 269A. Taxes and surcharges on taxes, duties and cess on particular functions are specified in Article 271 under any law created by Parliament. Article 273 This article provides for grants to the States of Assam, Bihar Orissa and West Bengal in lieu of any share of the net proceeds of the export duty on jute and jute products. The grants are charged to the Consolidated Fund of India and are to be made for a period of ten years from the commencement of the Constitution. Article 275 This article provides for grants-in-aid to the States by the Union government. The grants are to be made on the recommendation of the Finance Commission. The grants are to be used for the development of the States and for the welfare of the people. Article 276 This article provides for taxes that are levied by the States. The taxes are to be levied and
Article 302 empowers the Parliament to impose restrictions on trade, commerce and intercourse in the interest of the general public. Article 303 allows the Parliament to give preference to one State over another in the matter of trade, commerce and intercourse if there is a scarcity of goods in that State. Article 304 allows a State government to impose taxes on goods imported from other States and Union Territories. Case laws Gopinath v. the State of Kerala Under Article 286 the Supreme Court held that the sale of cashew nuts by the Cashew Corporation of India to local users was not in the course of import and did not come under an exemption of the Central Sales Tax Act, 1956. Hyderabad Chemical and Pharmaceutical Works Ltd. v. State of Andhra Pradesh The Supreme Court held that the State government could continue to levy a fee on the appellant for the supervision of the use of alcohol in the manufacture of medicines, even though the Parliament had passed a law that prohibited the levy of fees on the manufacture of medicines. SRD Nutrients Private Limited v. Commissioner of Central Excise It has ruled that the education cess and the higher education cess are surcharges, not cess. Conclusion The constitutional provisions relating to taxation in India are complex and have been interpreted by the courts in a number of cases. Black money Black money has long been a scourge for the Indian economy with residents refusing to report transactions to evade tax and avoid regulatory scrutiny. In 2015, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (Black Money Act) was enacted to penalise persons with black money abroad and to curb
2015 (Black Money Act) was enacted to penalise persons with black money abroad and to curb overseas diversion of Indian funds with the intention of evading taxes in India. The Black Money Act is essentially an extension of the Indian income tax regime that specifically targets residents hiding their income from foreign sources from the authorities. What is black money? Black money is generally money that is earned (either legally or through illicit activities) but has not been reported to authorities and, consequently, has not been taxed. Assessees and assessment Unlike the Income Tax Act, 1961 (Income Tax Act) (which taxes residents, non-residents and persons not ordinarily resident), the Black Money Act applies only to persons (assessees) who have been resident in India in the relevant year. As the taxable components under the Black Money Act are, by their very nature, undisclosed, their taxation differs significantly from the Income Tax Act (which provides for self-assessment). Under the Black Money Act, assessment of undisclosed foreign income and, or, assets and computation of tax and penalty thereon are undertaken by the assessing officer. The assessing officer may act: (i) upon receipt of information from authorities under the Income Tax Act or any other law in force; or (ii) suo motu upon coming across any information, if, based on such information, he is of the opinion that assessment is required. Rate of tax, penalty and recovery Under the Black Money Act, undisclosed foreign income and, or, assets are subject to tax at 30% of the taxable value of such income and, or asset. Further, the assessee is also liable to a penalty of 3 times of the tax computed. As a consequence, the assessee ends up paying 120% of the taxable value of undisclosed foreign income or asset. The Government may recover the applicable tax and penalty by issuing notices in the nature of garnishee notices to debtors and, or, employers of the assessee. Default in complying with such notices exposes the debtors and, or, employers to proceedings under the Black Money Act. Additionally, the sums may be recovered by attachment and sale of the assessee’s movable or immovable property, or by appointing a receiver for the management of the assessee’s movable and immovable property. Consequences of contravention The consequences of contravention of the Black Money Act are both civil and criminal. A range of monetary penalties are imposed for various non-compliances such as failure to file returns on time, failure to disclose foreign income and, or, assets, etc. For such wilful non-compliances, evasion of tax, etc., a person may be prosecuted and imprisoned for anywhere between 3 months and 10 years depending on the nature of the
