India has a well-structured tax system catering to its large population. Taxes are a necessary evil because it is the largest source of income for the government. This money is then utilized for different purposes and projects which then can lead to the development of the nation.
Central and State Governments along with local authorities such as municipal corporations call the shots on taxes. The government is unable to levy any tax unless it is passed as a law.
Here are some of the important features of the taxation system in India:
1.The Important Role of the Central and State Government
There are specific roles for both of the central and state government. The Central Government of India imposes taxes like customs duty, service tax, income tax, and central excise duty.
The state governments, on the other hand, imposes taxes such as professional tax, income tax on agricultural income, value-added tax (VAT), land revenue, state excise duty and stamp duty. The local bodies are also allowed to collect some taxes such as property tax, octroi and some other taxes on different services such as drainage and water supply.
2.Different Types of taxes
Taxes can be categorized under two headings namely direct and indirect taxes. The difference between the two lies in their implementation. Direct taxes are paid by the assessee while indirect taxes are levied on goods and services.
A) Direct taxes
Direct taxes are administered to individuals and corporate entities and simply cannot be transferred to others. The plethora of taxes include income tax, gift tax, and wealth tax.
Income tax
According to the Income Tax (IT) Act, 1961 every assessee with total income more than the maximum exempt limit has to pay this tax. Both the tax structure and rates are annually prescribed by the Union Budget. This tax is imposed at the time of each assessment year, starts on 1st April and ends on 31st March.
B) Indirect taxes
Indirect taxes are, as the term denotes, not directly paid by the assessee to the government authorities. These indirect taxes are levied on goods and services and collected by those who sell goods or offer services. Here are the most common indirect taxes in India. Some of the important indirect taxes are value-added tax (VAT), customs duty, octroi, excise duty, service tax and goods and services tax.
3. Revenue Authorities
CBDT or The Central Board of Direct Taxes is an integral part of the Department of Revenue under the Ministry of Finance. This body not only provides inputs for policy but also plans direct taxes in India besides being responsible for the administration of direct tax laws via the Income Tax Department.
CBEC
The CBEC or The Central Board of Excise and Customs is like the CBDT is also an integral part of the Department of Revenue under the Ministry of Finance. It is a nodal national agency whose services include administering central excise duty, customs and service tax in India.
CBIC
Under the GST regime, the CBIC or the Central Board of Indirect Taxes & Customs provide post-legislative approval. The CBIC would look after all the directorates, field formations and provide assistance to the government in policy making in lieu of GST, continuing with central excise duty levying customs functions.
The Indian taxation system has undergone several modifications over the years. The income tax rates have been standardized providing income tax rates with simpler governing laws helping common people understand the same.
