Indirect Tax System in India
| Tax | Relevant Statute | Particulars |
| Customs Responsibility | 1. Customs Act,1962
2. Customs Tariff Act, 1975 |
A task imposed by the Central Federal government on items imported into India. In case of exports, just really couple of products are accountable to custom-mades task.
Fundamental General Rate: 10% Additional responsibility of customizeds (CVD) equivalent to the import tax task levied on like goods produced in India @ 12.5% Special extra responsibility of custom-mades @ 4% Education Cess @ 2% and Secondary and Higher Education Cess @ 1% are also leviable on customizeds task |
| Central Worth Included Tax (CENVAT)- commonly known as excise duty | 1. Central Excise Act,1944
2. Central Import Tax Tariff Act, 1985 |
A tax on the manufacture or production of goods in India imposed by the Central Government.
Basic General rate: 12.5% |
| Service Tax | Finance Act, 1994 | A tax enforced by the Central Government on the services (except the services covered in the negative list of services).
Basic General Rate: 14% Swachh Bharat Cess @ 0.5% is likewise leviable on the value of taxable service. Even more, w.e.f. June 1, 2016, Krishi Kalyan Cess @ 0.5% will also be leviable on the value of taxable service. |
| Central Sales Tax | Central Sales Tax Act, 1956 | A tax on the inter-State sales of items enforced by the Central Federal government but appropriated by the originating State.
Rate: 2% (on submission of Type C by purchaser) |
| State-Level Value Added Tax | BARREL Acts of particular State Governments | A tax on the Intra-State sales/purchases of goods, enforced by the State Federal governments.
Rate normally at 5% and 12.5%/135% |
| Entry Tax | State particular legislations | A tax levied by the State Governments on entry of items into the State for sale, intake or use.
Rate varies from One state to another |
| Regional levies such as octroi or city taxes | Particular provisions by State Governments | These are imposed by community or regional authorities.
Rate varies from authority to authority |
Besides these, there are other indirect taxes levied by State Federal governments like high-end tax, entertainment tax and so on. Multiplicity of taxes and high rates of taxation have made the indirect tax structure quite complex in India; negatively affecting competitiveness of trade, market and development of economy.
Under the existing indirect tax structure, the various indirect taxes being imposed are not necessarily equally exclusive. Difficult CENVAT and State-Level BARREL are basically worth added taxes, set off of one versus the credit of another is not possible as CENVAT is a central levy and State-Level VAT is a State levy. The existing sales tax routine in India is a combination of origin based (Central Sales Tax) and destination based multipoint system of tax (State-Level BARREL).
Solutions were taxed for the very first time by the Central Federal government in the year 1994 by introducing the levy of service tax. Service tax is presently leviable on all the services except the services that are covered in the Unfavorable List. However, the same was charged on select services. Service tax is also a value included tax and the credit across the service tax and the central import tax duty is integrated at the central level.
GST– A treatment for ills of existing indirect tax program: An extensive tax structure covering products and services like Item and Service Tax(GST) would resolve these issues. Simultaneous intro of GST at both Centre and State levels would incorporate taxes on goods and services for the function of set-off relief and will guarantee that both the cascading results of CENVAT and service tax are gotten rid of and a constant chain of set-off from the initial producer’s point/service service provider’s point upto the retailer’s level/consumer’s level is developed. For such a GST, the Constitution of India requires to be amended to empower the States to levy tax on services as at present the power to levy service tax is vested only with the Centre.
Advised Articles
- Section 44 AD– Tax on Presumptive Basis
- List of Taxes which Common Man pay in India
- Submission of PAN Details of Property owner– Is required
- TDS Rate Chart
- Considered Dividend– Area 2(22)( e)
- Devaluation Rate Chart According To Earnings Tax
- Earnings Tax Due Dates
- EPF Withdrawal: TDS on EPF Withdrawal
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