Current Affairs

Issue

The Union government has emphasized it sovereign right to taxation in the country while scrapping the retrospective tax law.

 

Background

The government had recently decided to remove the law that imposed taxes on predated deals between companies to circum-navigate Supreme Court judgment.

 

Details

• The government has the constitutional right to impose taxes on organizations as well as individuals. Unless there is a law, nobody has right to levy or collect taxes.

• Any tax that is imposed on an entity needs the backing of a law made in the state legislature or the Parliament.

 

Tax

• A tax is a mandatory payment or donation that is imposed by a state on an individual for supporting the finances of the government.

• Individual does not have a choice while paying taxes as the amount is decided by the authority and they have to abide by it. If they fail, government can impose penalty or punishment.

 

Taxes in India

• Taxes imposed in India are in three-tier form. The central taxes, the state taxes and local body taxes are allowed.

• Many taxes are under the union list while others are under the state list. There are no taxes under the concurrent list.

 

Types of tax

1. Direct tax

It is form of taxation in which an organization or individual pays the amount directly to the authority that has imposed that particular tax.

 

 Types of direct taxes

• Income tax

It is a form of tax in which the state demands a share on the income an individual earns through his salary or profits. The rate of tax is progressive because the amount increases as income increases.

 

• Corporate tax

It is form of tax that is imposed on the net profit or income of a corporate. The rates are uniform for all companies.

 

• Wealth tax

It is a form of tax that is imposed on the wealth that an individual possess. They are also known as “equity” or “capital” tax.

 

2. Indirect taxes

It is a form of tax imposed on the goods and services that a customer avails. The tax is ultimately paid by the customer and not generally targeted at an individual.

 

 Types of indirect taxes

• GST

It is a multi-stage destination-based taxe imposed by the government on all goods and services across the country.

 

• Excise duty

It is a type of tax that is imposed on a commodity for its manufacture, licensing and sale legally in a particular territory.

 

• Security transaction tax

It is an amount that is paid by an individual on the value of securities that is transacted from stock exchanges in the country.