Introduction

Concept and introduction of Tax

Taxation is the inherent power of the state to impose and demand contribution upon
persons, properties or right for the purpose of generating revenue for public purposes.
Taxes are enforced proportional contributions from persons to property levied by the law
making body of the state by virtue of its sovereignty for the support of the government
and all public needs.

Brief History of Taxation

Tax is today an important source of revenue for the government in all the countries. More
than 3000years ago, the inhabitants of ancient Egypt and Greece used to pay tax like
consumption taxes and custom duties. Income tax was first introduced in India in 1800
by James Wilson who becomes Indians First Finance Minister.

In order to meet the losses sustained by the government on account of military mutiny of
1857. In 1918 a new income tax bill was passed and which was further again replace in
1922. Finally the Ministry of Law and Finance the income tax was passed in 1961 brought
and came in force on 1 April 1962 and this is also known as the Financial Year.
Taxation System

Tax system raises money to finance government. All governments require payment of
money. Taxes from people. Government use revenue to pay soldiers, police, to build dams
and roads, to operate schools and hospitals, to provide food for the poor and medical care
facilities etc.

So, taxation is the most important source of revenue for modem government typically
accordingly for 90% or more of their income.

MEANING OF TAX

The word Tax came from Latin word ‘Taxo' which means to asses or estimate.
Tax can be defined in the following ways:
“The compulsory payments made to governments associated with certain are called Tax”
“A specific purpose, compulsory contribution by the people to public treasury to meet the
expenditure of government is called Tax”.
Tax in general is the imposition of financial charge upon an individual or a company by
the government of India or their respective state or similar other functional equivalents in
the state. The computation and imposition of the varied taxes prevalent in the country are
carried in the
Ministry of Finance and Department of Revenue.

Different Types of Taxes

Different types of taxes in India

Prevalence of various kinds of taxes is found in India. Taxes can be either direct or
indirect. However, the types of taxes even depend on whether a particular tax is being
levied by the central or state government or any municipalities. Following are some of the
major taxes levied by the Indian government:

1.Direct Taxes

A direct tax is a tax that is paid by an individual or an organization to the imposing entity
or to be precise. Direct Tax is the one which is paid to the government by the tax payers.
These tax payers include people and organization both also it is directly imposed by the
government and cannot be transferred for payment to some other entity. To name a few
of the direct taxes, which are imposed by the Indian government are:

• Corporate Tax
• Banking Cash Transaction Tax
• Capital Gains Tax
• Double Tax Avoidance Treaty
• Fringe Benefit Tax
• Securities Transaction Tax
• Personal Income Tax
• Tax incentives.

2.Indirect Taxes

An indirect tax is tax collected by an intermediary from the person who bears the ultimate
economic burden of the tax. The intermediary later files a tax return and forwards the
proceeds to government with the return. Indirect Tax is a type of tax where the incidence
and impact of taxation does not fall on the same entity.

• Goods and Services Tax

• Sales Tax
• Value Added Tax
• Custom Duty and Octroi Tax
• Excise Duty
• Anti-Dumping Duty.
Introduction to Goods and Services Tax (GST):

The Goods and Services Tax (GST) is the biggest and substantial indirect tax reform since
1947. The main idea of GST is to replace existing taxes like value-added tax, excise duty,
service tax and sales tax. GST as it is known is all set to be a game changer for the Indian
economy. India, as one of the biggest democratic countries, follows the federal tax system
for levy and collection of various taxes. Different types of indirect taxes are levied and
collected at different points in the supply chain. The centre and the states are empowered
to levy respective taxes as per the Constitution of India. The Value Added Tax (VAT) when
introduced was considered to be a major improvement over the pre-existing Central
excise duty at the national level and the sales tax system at the State level. Now the Goods
and Services Tax (GST) will be a further significant breakthrough the next logical step
towards a comprehensive indirect tax reform in the country.

Because, It’s a tax system which has converted the entire country into an integrated
market. “One Tax One Nation” is the motto of this indirect tax system. GST is a
destination and consumption based indirect tax which is imposed over the supply of
goods and services directly from the manufacturer to the consumer. Thus the final
consumer will bear only the GST charged by the last dealer in the supply chain, with set-
off benefits at all the previous stages.

France was the first country to implement the GST in 1954; since then, an estimated 160
countries have adopted this tax system in some form or another. Some of the countries
like: In Australia, the system was introduced in 2000 to replace the Federal Wholesale Tax.
GST was implemented in New Zealand in 1986.

A hidden Manufacturer's Sales Tax was replaced by GST in Canada, in 1991. In

Singapore, GST was implemented in 1994. GST is a value-added tax in Malaysia that came
into effect in 2015.

History of GST in India:

2000: In India, the idea of adopting GST was first suggested by the Atal Bihari Vajpayee
Government in 2000. The state finance ministers formed an Empowered Committee
(EC) to create a structure for GST, based on their experience in designing State VAT.
Representatives from the Centre and states were requested to examine various aspects of
the GST proposal and create reports on the thresholds, exemptions, taxation of inter-state
supplies, and taxation of services. The committee was headed by Asim Dasgupta, the
finance minister of West Bengal. Dasgupta chaired the committee till 2011.
2004: A task force that was headed by Vijay L. Kelkar, the advisor to the finance
ministry, indicated that the existing tax structure had many issues that would be mitigated
by the GST system.

February 2006: The finance minister set 1 April 2010 as the GST introduction date.

February 2007: The 1 April 2010 deadline for GST implementation was retained in the
union budget for 2007-08.

February 2008 : At the union budget session for 2008-09, the finance minister confirmed
that considerable progress was being made in the preparation of the roadmap for GST.
The targeted timeline for the implementation was confirmed to be 1 April 2010.

February 2010: The government introduced the mission-mode project that laid the
foundation for GST. This project, with a budgetary outlay of Rs.1,133 crore, computerised
commercial taxes in states. Following this, the implementation of GST was pushed by one
year.

March 2011: The government led by the Congress party puts forth the Constitution
(115th Amendment) Bill for the introduction of GST. Following protest by the opposition
party, the Bill was sent to a standing committee for a detailed examination.

June 2012: The standing committee starts discussion on the Bill. Opposition parties raise
concerns over the 279B clause that offers additional powers to the Centre over the GST
dispute authority.

May 2014: The Constitution Amendment Bill lapses. This is the same year that Narendra
Modi was voted into power at the Centre.

December 2014: India’s new finance minister, Arun Jaitley, submits the Constitution
(122nd Amendment) Bill, 2014 in the parliament. The opposition demanded that the Bill
be sent for discussion to the standing committee.

May 2015: The (122nd) Constitution Amendment Bill was passed by LOK SABHA on 6
May 2015.

August 2016: The bill was passed by RAJYA SABHA on 3rd August 2016 with some
changes. And changes made were unanimously passed by LOK SABHA on 8 th August
2016.

September 2016: On 8th September 2016 The Honourable President of India,

Pranab

Mukherjee gives his consent for the (122nd) Constitution Amendment Bill to become an
(101th Ammendment) Act.

July 2017: GST Law was made applicable in India from 1st July 2017 (except J&K).

July 2017: GST Law was made applicable to J&K from 8th July 2017.
2017: Four Bills related to GST become Act, following approval in the parliament and the
President’s assent:

• Central GST Bill

• Integrated GST Bill
• Union Territory GST Bill
• GST (Compensation to States) Bill.