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Since Constitution of India is foundation and source of powers to all laws in India, it is
necessary to understand general background of Constitution to enable us to understand and
appreciate each individual Law. In India, Constitution which came into effect on 26th
January 1950 is supreme and all laws and Government actions are subordinate to our
Constitution.

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   ërticle 246(1) of Constitution of India states that
parliament has exclusive power to make law with respect to any of matters, ës per article
246(3), state Government has exclusive power to make law for state with respect to any
matter enumerated, in the basic scheme of taxation in India, it is envisaged that;

i.V Œirect taxes and

ii.V Indirect taxes


VCentral Government : The Government will get tax revenue from;

1.V Income Tax
2.V Central Excise
3.V Customs
4.V Service tax

VState Government : The Government will get revenue from :
1.V ëgricultural Income tax
2.V State excise (duty on liquor)
3.V Sales tax, Entry tax, Octroi

Union List relev nt to t  tion - List I, called ³Union List´, contains entries like Œefence of
India, Foreign affairs, War and Peace, Banking etc. Entries in this list relevant to taxation
provisions are as follows :

ENTRY NO. 82 - Tax on income other than agricultural income.

ENTRY NO. 83 - Œuties of customs including export duties.

ENTRY NO. 84 - Œuties of excise on tobacco and other goods manufactured or produced in
India except alcoholic liquors for human consumption, opium, narcotic drugs, but including
medicinal and toilet preparations containing alcoholic liquor, opium or narcotics.

ENTRY NO. 85 - Corporation Tax.

ENTRY NO. 92ë - Taxes on the Sale or purchase of goods other than newspapers, where
such sale or purchase takes place in the course of Interstate trade or commerce.

ENTRY NO. 92B - Taxes on consignment of goods where such consignment takes place
during Interstate trade or commerce.

ENTRY 92C - Service Tax

ENTRY NO. 97 - ëny other matter not included in List II, list III and any tax not mentioned
in list II or list III. ese re c lled µResidu l Powers¶.)
St te list pert ining to t  tion - State Government has exclusive powers to make laws in
respect of matters in list II of Seventh Schedule to our Constitution. These entries include
Police, Public Health, ëgriculture, Land etc. Entries in this list relevant to taxation provisions
are as follows:

ENTRY NO. 46 - Taxes on agricultural income.

ENTRY NO. 51 - Excise duty on alcoholic liquors, opium and narcotics.

ENTRY NO. 52 - Tax on entry of goods into a local area for consumption, use or sale therein
(usually called Octroi).

ENTRY NO. 54 - Tax on sale or purchase of goods other than newspapers except tax on
interstate sale or purchase.

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Income tax is an direct tax is levied on income of individuals or business, when the tax is
levied on the income of companies, its often called a corporate income tax or profit tax.

Individual income taxes often tax the total income of the individual (with some deductions
permitted).

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Central excise is an indirect tax, ëny goods manufactured in India attracts Excise Œuty, duty
is payable on removal of goods through excise invoice from the manufacturers place.
General applicable rate of Central Excise duty is 10%

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Customs duty is on import into India and export out of India. ës per ancient custom, a
merchang entering a kingdom with his goods had to make a suitable gift to king. In the
course of time, this custom was formalized into Customs Œuty.
General applicable rate of Custom duty is 30%

 

Service tax is a tax, levied on service providers in India, except the State of Jammu and
Kashmir.

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ëgricultural Income tax:

Levy of tax on ëgricultural income by state Government is called agricultural income tax,

ëgricultural income means,

a.V ëny rent or revenue derived from land which is used for agricultural purpose
 b.V The performance by cultivator
c.V Sales crops

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a.V Total agricultural income of the persons

b.V No tax payable by any person other then company or firm
c.V Land situated out side the sate not applicable
d.V Following item cultivating not applicable like, Ragi, wheet, ginger, mango, vegetable,
sweet potato etc., (exempted items differ from state to state )



 
State excise dutylevied on absolute alcohol, Country liquor, beer wine, toddy and neera
completely control by state Government, State excise department.


Sales Tax is a tax, levied on the sale or purchase of goods. There are two kinds of Sales Tax
i.e. Central Sales Tax, imposed by the Centre and Sales Tax, imposed by each state.




When sales made with in the state limit have to pay local sales tax / VëT


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Central Sales tax is generally payable on the sale of all goods by a dealer in the course of
inter-state Trade or commerce or, outside a State or, in the course of import into or, export
from India.

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The general rate of local tax differ from state to state example: Gujarat general VëT rate
15%, Maharashtra state 12.5%, Karnataka 13.5% and Rajastan 14% etc.,

CST rate : if Sales made to without declaration form C, have to collect applicable local rate.

















  
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Name of the Purpose of the form Frequency to use ëpplicable
Form tax rate
Form C Œeclaration by Every quarter, one form 2%
purchasing register would be sufficient
dealer to obtain goods
at concessional rate
Form Œ (now Œeclaration by Every quarter, one form 2% (no
omitted) purchasing register would be sufficient question
dealer to obtain goods raised after
at concessional rate by 1.4.2007
Government company
Form E-I and E- Certificates for sale in Every quarter, one form 0%
II transit would be sufficient
Form F Form by Monthly, but to be 0%
branch/consignment submitted quarterly
agent for goods
received on stock
transfer
Form H Certificate of export ënnually 0%
Form I Certified by ZEZ unit ënnually 0%
Form J Certificate to be issued ënnually 0%
by foreign diplomatic
mission or United
Nation agencies


  
Entry tax is levid on that product which transfer or enter a product from one state to
another state. Entry tax for different goods are different.