BUSINESS

TAXATION

ACHIRA H DOSHI
III B.COM (A&F), SH-II
0801179
TAX

A fee charged ("levied") by a government on a product, income, or activity. If tax is

levied directly on personal or corporate income, then it is a direct tax. If tax is levied on
the price of a good or service, then it is called an indirect tax. The purpose of taxation is
to finance government expenditure. One of the most important uses of taxes is to finance
public goods and services, such as street lighting and street cleaning. Since public goods
and services do not allow a non-payer to be excluded, or allow exclusion by a consumer,
there cannot be a market in the good or service, and so they need to be provided by the
government or a quasi-government agency, which tend to finance themselves largely
through taxes.

EXCISE TAX
Excise Tax is more commonly known as Excise Duty and is one of the most well-known
forms of taxation in India. Any manufacturer of excisable products is liable to pay this
tax and is levied on a wide variety of commodities manufactured in India.

For The Indian central government this duty is an important source of revenue. The
Excise Tax is required to be paid before the goods leave the factory, as a result of which
the small-scale industries do not pay Excise Tax up to the specified value of goods
cleared from the factory. The state governments are liable to levy excise duty on a few
commodities including liquor, provided the central government fails to do so. At times
when the manufactured goods are exported excise drawback is available.

TYPES OF EXCISE TAXES

In India, the three types of Central Excise Taxes being collected include the Basic Excise
Duty, Additional Duty of Excise, and Special Excise Duty.

The Basic Excise Duty is charged under the Section 3 of the Central Excises and Salt
Act, 1944. According to this all excisable goods other than salt produced or manufactured
in India, has to pay the rates given in the schedule to the Central Excise Tariff Act, 1985.

As per the Section 3 of the Additional duties of Excise Act, 1957 it is authorized that only
the goods described in the Schedule to this Act are liable for Excise Tax payments.
Generally these are imposed under different categories like medicinal and toilet
preparations, sugar and other industries development.

The Special Excise Duty following the Section 37 of the Finance Act, 1978 was imposed
on all excisable goods that are also subjected to Basic excise Duty under the Central
Excises and Salt Act, 1944. However, the Finance Act provisions regarding the said fiscal
year specify the levy and collection of the Special Excise Duty.

CUSTOM DUTY
Tax levied on imports (and, sometimes, on exports) by the customs authorities of
a country to raise state revenue, and/or to protect domestic industries from more efficient
or predatory competitors from abroad. Also called tariff, duty is based generally on
the value of goods (called ad valorem duty) or upon the weight, dimensions, or some
other criteria of the item (such as the size of the engine, in case of automobiles)

INCOME TAX
Income Tax in India includes all income except the agricultural income that is levied and
collected by the central government. This particular income is also shared with the states.
The Income Tax was incorporated in India from the year1860. However, after many
alterations, finally with the Indian Income Tax Act, 1922, there was a revolutionary
change brought by the All India Income Tax Committee. This is significant as after this
the administration of the Income Tax came under the direct control of the Central
Government. This Act got amended again in the year 1961, and the present Income Tax
regime in India is still following the provisions of the Act of 1961.
As per the Income Tax Act 1961, the assessee whose total income level is more than the
maximum exemption limit, are under the domain of chargeable Income Tax. The assessee
has to pay the Income Tax at the rates stated in the provisions of the Finance Act. The
payment of the Income Tax is to be calculated on the total income of the last year in the
relevant financial assessment year. For the determination of the total income of an
individual the residential status in India is a necessary parameter. Every Income Tax
payer should file Tax Return under the existing law.

The TDS is the Income Tax that is subtracted at the beginning of income by the employer
or the taxpayer to pay to the government, following certain limitations and conditions.
This encompasses various types of income like -

• Salary
• Interest
• Commission and contract fees
• Rent
• Professional fees

The TCS is that type of Income Tax that is collected by certain goods-seller at the
specified rates on the purchase of those goods. It is then remitted on the behalf of the
buyer to the governmental treasury.

The Income Tax paid by the income earner during the previous year of the assessment
year is known as the Advance Tax. The total income for the year is estimated and then
this tax is computed, after the surcharge is calculated and considering the available rebate
on the tax. This Income Tax is paid in three installments. In case the payment of total
amount of advance tax is not paid on or before the 15 March then 1% interest will be
charged for one month.
SALES TAX

Sales Tax or the tax on consumption is liable for payment during the purchase for certain
goods and services. Such taxes involves a high compliance rate, can be calculated easily
and the collection is simple as only one item is charged exactly once. At present the
Central Sales Tax in India has been reduced from existing 4% to new 3%. Generally,
attempts are made by the conventional or retail Sales Tax to charge the tax only on the
end user. This ultimately prevents the pyramiding of the tax in which the items are
subjected to taxes more than once, makes its way from production to final retail sale. The
Sales Tax is the most important source of revenue of the state governments, with every
state having their respective Sales Tax Act. The tax rates are also different for respective
states. The Sales Tax authority in the state is responsible for the collection of the Sales
Tax. Every dealer is liable to pay this tax on the sale of any goods affected by him during
the inter-state trade or commerce. The Sales Tax can be stated as a Regressive Tax,
which implies that the low-income people generally tend to spend a greater percentage of
their income in taxable sales than people with high incomes.

TYPES OF SALES TAX

There are several types of Sales Taxes including Seller or Vendor Taxes, Retail
Transaction Taxes, Consumer Excise Taxes, and Value Added Taxes.

The value-added tax or VAT is the most common type of Sales Tax under which all
industries remit taxes on their sales but also get back the VAT amount so far remitted by
their suppliers. The government in this case refrains from determining about which sales
are taxable. This is because all categories of sales like retail, wholesale, and intermediate
sales are taxable under the tax laws of India.
 COMPARISION BETWEEN THE TAXES

CRITERA EXCISE CUSTOMS SALES TAX SERVICE

DUTY DUTY TAX
It is tax on It is charged in It is a tax on the It is a tax on the
production/ respect of sale of goods. services.
MEANING manufacture goods imported
goods. into/ exported
from India.
Excisable Goods have Enactment of Service Tax
ACT goods have been classified Central Sales- was introduced
been classified by customs Tax, 1956. in the year 1994
by central Tariff Act, through
excise Tariff 1975. Finance Act,
Act, 1985 1994.
Excise duty on Customs duties CST is levied Service tax is
LEVY medical and are the sole by the Central levied by
AUTHORITY toilet prerogative of Govt. it is central
preparations are the central govt. collected and government and
levied by retained by the additionally
Central Govt. state govt. handled by
but collected excise dept
appropriated by
the State Govt.
Excise duty is Import duty is Sales tax is Service tax is
CHARGED charged on levied on all charged on the charged on
assessable items. Export sale price of the taxable services
value of goods. duty is levied good. provided and to
only on a few be provided
items.
Excise duty is Customs duty is State govt. are Service tax is
UNIFORMITY uniform uniform empowered to uniform
throughout the throughout the levy their own throughout the
whole country. whole country rates in respect whole country
of sale goods
Excise duty is Customs duty Sales tax arises Service tax
TAX payable before arises only only after the arises only after
PAYABLE goods are when goods are sale has taken the service is
removed from imported into / place. rendered to the
the factory / exported from client.
godown India.