CHIEF EDITOR’S DESK• Sound tax policies of a nation are an indication of strong governance and

sustainable development. This fact is reflected from the historical

perspective also. All the successful rulers known for being good

administrators had also put in place an excellent revenue collection

system – be it the Mauryas, Guptas, Iltutmish or Akbar.

• Their name to fame was not just because of their potential supremacy

but also because of the taxation policies they pursued.

TAXES CAN BE BROADLY CLASSIFIED INTO TWO CATEGORIES:

• Direct Tax

• Indirect Tax

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The government body that oversees the payment

of direct taxes is called Central Board of Direct

Taxes (CBDT)

The CBDT is a part of the Department of

Revenue

WHICH OF THE FOLLOWING IS CORRECT REGARDING CBDT?

1. The CBDT Chairperson is ex-officio special secretary

and is under the direct charge of the revenue

secretary of India.

2. He has a fixed tenure of 3 years

_____________________________________

A. Only 1 is true

B. Only 2 is true

C. Both are true

D. Both are false answer - A

DIRECT TAX• Income Tax

•Capital Gains Tax - This tax is payable when you receive a fairly

large amount of money from an investment or through a property sale,

whatever be it.

•Securities Transaction Tax - Every time you buy a share, on

the Indian Stock Exchange you're also paying the tax on it.

•Perquisite Tax - If the office vehicle is used for both official and

personal reason could be taxed but if it's only used for official purposes,

no taxes are levied on it.

DIRECT TAX

•Corporate Tax - This is the income tax levied on the

revenue earned by a company.

•The international companies have different tax rates

compared to the domestic companies.

INDIRECT TAX

• Indirect taxes aren't directly payable to the

Government by the consumer. They are collected

and paid to the government by the middle man i.e.

the person who provides the service or sells the

product. These taxes are added to the price of the

product thus making it costlier. Some of the most

common examples of indirect taxes are Value

Added Tax (VAT) and Sales Tax.

SOME OF THE EXAMPLES OF INDIRECT TAXES

•Sales Tax: This is the tax that is levied or imposed

on the sale of the product. The tax is imposed on

the product seller who transfers it to the end

consumer. The sales tax is included in the price of

the item sold.

SOME OF THE EXAMPLES OF INDIRECT TAXES

•Service Tax: Like Sales Tax is added to the selling

price of goods, Service Tax amount is added to the

services provided. The Service Tax is applicable

only to companies that provide services. It is

collected on a monthly or quarterly basis

depending upon how the service is provided.

SOME OF THE EXAMPLES OF INDIRECT TAXES

• Value Added Tax: This tax is levied or imposed throughout all the stages of the supply chain viz. the manufacturer, the distributor, wholesaler, retailer all the way to the consumer. However, it is not applicable on food items, essential drugs or exported items.

• VAT is only applicable on food items that are prepared in the restaurant as they add value before serving it to you. So make sure that you are not charged VAT on packaged food items or water bottles.

Under state government

SOME OF THE EXAMPLES OF INDIRECT TAXES

•Custom Duty & Octroi: Custom Duty is the tax levied on goods that need to be imported from another country by land, sea and or air. It doesn't matter if you purchase the said item in a different country and then bring it to India. The taxes will still be imposed. While the Custom Duty makes sure that the products entering India are properly taxed, similarly the Octroi makes sure that goods leaving the state borders are appropriately taxed. The Octroi charges are maintained by the state government.

•Excise Duty: This is the tax that is levied on all

goods that are manufactured in India. It is also

called the Central Value Added Tax or CENVAT.

The tax is collected by the government from the

manufacturers or from those who receive and

consequently distribute the manufactured goods

OTHERS

•Entertainment Tax

•Education Cess/Surcharge

•Swachh Bharat Cess

•Krishi Kalyan Cess

WHAT IS GST?

•Goods and Services Tax (GST) is an indirect tax

•GST or Goods and Service Tax is the

comprehensive tax that is brought into effect in

order to replace all the other indirect taxes

(mentioned above) imposed by the state and

central government. It is levied on manufacture,

sale and use of the goods and services.

HOW GST WILL WORK IN INDIA

•GST, once implemented will club all of these

separate State and Central taxes into Central GST

and State GST, thus erasing the borders between

states and making India a common market place.

TA XES CURRENTLY LEVIED AND COLLECTED BY THE CENTRE

• a. Central Excise duty

• b. Duties of Excise (Medicinal and Toilet Preparations)

• c. Additional Duties of Excise (Goods of Special Importance)

• d. Additional Duties of Excise (Textiles and Textile Products)

• e. Additional Duties of Customs (commonly known as CVD)

• f. Special Additional Duty of Customs (SAD)

• g. Service Tax

• h. Central Surcharges and Cesses so far as they relate to supply of goods and services.

STATE TAXES THAT WOULD BE SUBSUMED UNDER THE GST ARE:

• a. State VAT

• b. Central Sales Tax

• c. Luxury Tax

• d. Entry Tax (all forms)

• e. Entertainment and Amusement Tax (except when levied by the local bodies)

• f. Taxes on advertisements

• g. Purchase Tax h. Taxes on lotteries, betting and gambling

• i. State Surcharges and Cesses so far as they relate to supply of goods and services.

WHICH OF THE FOLLOWING STATE TAXES ARE NOT INCLUDED IN GST?

1) State Value Added Tax

2) Luxury tax

3) Taxes on lottery, betting and gambling

a. 1, 2

b. 1, 3

c. All of the above

d. None of the above Answer - D

•Goods for other states during manufacturing can

be bought at cheaper rates.

•The final price of products will be much cheaper

due to reduction in multiple taxes (Tax Cascading)

CASCADING EFFECT Action Cost Tax 10% Total

Buys raw materials 100 10 110 VAT(state tax)

Manufacturing+40 150 15 165 -Excise

Wholesaler+30 195 19.50 214.50 -VAT

Retail + 20 234.50 23.45 257.95 - CST

Total 190 67.95 257.95

GST ACROSS THE GLOBE

•About 160 countries in the world already have a

unified GST or VAT in place

• France kickstarted this back in 1954. Almost all of

the European countries have GST.

•USA happens to be one of the world powers

without a GST, as it provides a high level of

autonomy to the states when it comes to taxation.

•Goods and Service Tax is imposed by the government as a sort of Value Added Tax on the goods you buy or services that you enjoy.

•Pre-GST, the taxes imposed by the state include Sales Tax, Value Added Tax, Octroi, Stamp Duty, Entertainment Tax, Toll Tax etc. The Central government levies Customs Duty, Income Tax, Excise Duty, Central Sales Tax while the Property Tax is imposed by local authorities.

ADVANTAGES OF GST

•The GST being a federal law prevents the states have

their own taxation laws on goods and services.

•Makes the taxation system easier to understand and

cost effective in terms of implementation.

•Tax evasion at various stages will be eliminated as tax

offsets can be collected only if taxes have been paid

originally. You will also be able to buy raw materials or

constituent materials for production only from those

who have paid taxes, in order to claim benefits.

DISADVANTAGES

•GST is not good news for all sectors, though. In

the current system, many products are exempted

from taxation. The GST proposes to have minimal

exemption list. Currently, higher taxes are levied

on fewer items, but with GST, lower taxes will be

levied on almost all items.

•GST has eliminated all the above-mentioned taxes.

After July 1 excise, octroi, sales tax, CENVAT,

Service tax, turnover tax, etc. are not applicable.

Now all these taxes fall under GST.

GST WILL NOT CAUSE INFLATION IN INDIA

•About 160 countries in the world already have a

unified GST or VAT in place

• France kickstarted this back in 1954. Almost all of

the European countries have GST.

•USA happens to be one of the world powers

without a GST, as it provides a high level of

autonomy to the states when it comes to taxation.

WHAT IS SGST/CGST/IGST?

•For e.g.: – Rajesh, a dealer in Maharashtra sold

goods to Anand in Maharashtra worth Rs. 10,000.

The GST rate is 18% comprising of CGST rate of

9% and SGST rate of 9%, in such case the dealer

collects Rs. 1800 and Rs. 900 will go to the central

government and Rs. 900 will go to the Maharashtra

government.

tax Rates Products

0% Milk Kajal

Eggs Educations Services

Curd Health Services

Lassi Children’s Drawing & Colouring Books

Unpacked Foodgrains Unbranded Atta

Unpacked Paneer Unbranded Maida

Gur Besan

Unbranded Natural Honey Prasad

Fresh Vegetables Palmyra Jaggery

Salt

5% Sugar Packed Paneer

Tea Coal

Edible Oils Raisin

Domestic LPG Roasted Coffee Beans

PDS Kerosene Skimmed Milk Powder

Cashew Nuts Footwear (< Rs.500)

Milk Food for Babies Apparels (< Rs.1000)

Fabric Coir Mats, Matting & Floor Covering

Spices Agarbatti

Coal Mishti/Mithai (Indian Sweets)

Life-saving drugs Coffee (except instant)

12% Butter, Computers

Ghee Processed food

Almonds Mobiles

Fruit Juice Preparations of Vegetables, Fruits, Nuts or other parts of Plants including Pickle Murabba, Chutney, Jam, Jelly

Packed Coconut Water Umbrella

18% Hair Oil Capital goods

Toothpaste Industrial Intermediaries

Soap Ice-cream

Pasta Toiletries

Corn Flakes Computers

Soups Printers

28%Small cars (+1% or 3% cess) High-end

motorcycles (+15% cess)

Consumer durables such as AC and fridge Beedis

are NOT included here

Luxury & sin items like BMWs, cigarettes and

aerated drinks (+15% cess)