Indirect Taxation in India:-
Introduction:-
Government needs funds for various purposes like maintenance of law and order, defence, social and health issues etc. Government obtains funds from various sources out of which main source is indirect taxation.
In the basic scheme of taxation in India it is anticipated that-
(a) Central Government will get tax revenue from income tax (except tax on agriculture income), excise duty (except on alcoholic drink) and Customs.
(b) State Government will get tax revenue from sales tax, excise on liquor and tax on Agricultural Income
(c) Municipalities will get tax revenue from octroi and house property tax.
Income tax, Central Excise and Customs are administered by Central Government.
Article 246(1) of Constitution of India states that Parliament has exclusive powers to make a law with respect to any of matters enumerated in List I in the seven schedule to Constitution which is also called union list.
As per article 246(3) State Government has exclusive powers to make a laws for State with respect to any matter enumerated in list II of seventh schedule to Constitution.
List III concurrent list contain entries where both Union and State Government can exercise power.
Union List:- Central Government has exclusive power.
|
Sr. No. |
Entry No. |
Particulars |
|
1 |
82 |
Tax on income other than agricultural income. |
|
2 |
83 |
Duties of Customs including export duties |
|
3 |
84 |
Duties of excise on tobacco and other goods manufactured or produced in India except alcoholic liquors for human consumption, opium, narcotic drugs,but including medicinal and toilet preparations containing alcoholic liquor, opium or narcotics. |
|
4 |
85 |
Corporation Tax |
|
5 |
92A |
Taxes on the Sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of Interstate trade jor commerce. |
|
6 |
92B |
Taxes on consignment of goods where such consignment takes place during Interstate trade or commerce. |
|
7 |
92C |
Tax on services |
|
8 |
97 |
Any other matter not included in list II and list III and any tax not mentioned in list II or list III. (These are called 'Residual Power'). |
State List: State Government has exclusive power.
|
Sr. No. |
Entry No. |
Particulars |
|
1 |
46 |
Taxes on agricultural income. |
|
2 |
47 |
Duties in respect of succession to agricultural land. |
|
3 |
48 |
Estate duty in respect of agricultural land. |
|
4 |
49 |
Tax on lands and buildings |
|
5 |
51 |
Excise duty on alcoholic liquors, opium and narcotics. |
|
6 |
52 |
Tax on entry of goods into a local area for consumption, use or sale therein (usually called Octroi). |
|
7 |
54 |
Tax on sale or purchase of goods other than newspapers except tax interstate sale or purchase. |
Concurrent List:-
List III of Seventh Schedule, called “Concurrent list”, includes matters where both Central Government and State Government can make laws. In case of entries included in concurrent list, in case of conflict, law made by Union Government prevails.
Comparison between Direct Tax and Indirect Tax:
|
Basis for Comparison |
Direct Tax |
Indirect Tax |
|---|---|---|
|
Meaning |
Direct tax is referred to as the tax, levied on person's income and wealth and is paid directly to the government. |
Indirect Tax is referred to as the tax, levied on a person who consumes the goods and services and is paid indirectly to the government. |
|
Burden |
The person on whom it is levied bears its burden. |
The burden of tax can be shifted to another person. |
|
Types |
Wealth Tax, Income Tax, Property Tax, Corporate Tax, Import and Export Duties. |
Central Sales tax, VAT (Value Added Tax), Service Tax, STT (Security Transaction Tax), Excise Duty, Custom Duty. |
|
Evasion |
Tax evasion is possible. |
Tax evasion is hardly possible because it is included in the price of the goods and services. |
|
Inflation |
Direct tax helps in reducing the inflation. |
Indirect taxes promotes the inflation. |
|
Levied on |
Persons, i.e. Individual, HUF (Hindu Undivided Family), Company, Firm etc. |
Consumers of goods and services. |
|
Nature |
Progressive |
Regressive |
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