The structure of the Tax system is quite detailed, with lucid dissimilarity in power between State, Central, and local governments. The taxes on income, central excise, service tax and customs duties are levied by the Central government. Income mentioned above does not include agricultural income. Tax on income from agriculture is levied by the respective state government. Value Added Tax that is VAT and where VAT is not applicable then sales tax, duty on stamps, state excise, and revenue from land and professional taxes are levied and collected by the State government. Tax on property, service charges for utilities like drainage, water supply, drainage etc and octroi are levied and collected by the local bodies.
Based on the Indian Constitution, it is the government which has the responsibility to charge taxes on individuals and organizations. On the other hand, the constitution states that no one has the power to charge or levy taxes with the exception of the influence of law. No matter what tax is being levied it must be supported by the law approved by the parliament or the legislature.
The most important authority which is accountable for the collection of taxes is the Central Board of Direct Taxes. It is actually a section of Revenue Department which is controlled by the Ministry of Finance of the Indian government. The Central Board of Direct Taxes operates based on the Central Board of Revenue Act of 1963.
As pointed out earlier, the authority to charge tax has been allotted to the Central and the State Government. It is essential to recognize that the constitution in addition affirms that no authorities of law can charge or collect taxes. Then how does the system work? For each tax, there necessitates to be a complementary law that is approved in either the Parliament or the State Legislature. To facilitate soft operation of the taxation structure, 3 lists have been put forth in the Indian Constitution in Article 246.
List I states the parts where the Parliament is the only authority to make laws
List II states the parts where the State Legislature is the only authority to make laws
List III states the parts where the Parliament in cooperation with the State Legislation has the authority to make laws.
Tax plays a significant role in the formation of industrial policies of the government. Rationalization of tax in India has been the priority in the latest economic reforms. In reality during the past 10-15 years, the system of Indian tax has gone through remarkable alterations. The rates of tax have been streamlined and laws relating to tax have been simplified ensuing in improved observance, effortless payment of tax and enhanced implementation. The course of validation of tax management is in progress in India. VAT has taken the place of sales tax by several State Governments since 1st April, 2005.
All this said we can further add that in the present world, it is imperative than ever to position a competent tax scheme. In an environment which has global effect all the restructurings made in the tax structure in a way serves a large number of wants. They can lend a hand to improve revenue output, lessen economic deformations, and assist in creating a steady and conventional market atmosphere. With the increasing mobility of capital and expert labour which increases new tax problems constant improvements is mandatory to maintain the nation updated with changing situations. In addition, tax improvements can assist in addressing equity alarms.
On the other hand, not like in the past, fairness in tax plan should not entail decreasing the returns of the rich, but increasing those of the poor. Consequently, there requires to be a concept shift, away from a socialistic centre on truthful equity and in the direction of parallel equity. Until of late, this obsession with vertical equity in the Indian tax system produced huge inducements for tax evasion. At the same time as this is beginning to transform, a lot of modifications stay on incomplete.
Conclusion
In the stir of economic transformations, the tax arrangement in India has under gone a far-reaching alteration, aligned with the laissez-faire strategy. Some of the alterations are:- reasoning of tax structure; progressive decrease in high charges of customs duty; decrease in company tax charge; customs duties is planned to be associated with ASEAN levels; introduction of value added tax; the tax base to be made wider; to assure improved compliance the tax laws have been cut down.
Tax holidays in the form of special consideration for a variety of investments are provided by the Tax policy in India. These include inducement to priority segments and to industries situated in exceptional area or regions. Tax motivations are obtainable also for those occupied in expansion of road and rail network.
Author: Ms. Sowmya Somaiah is a Company Secretary and Founder of "Sunshine Corporate Solutions Pvt Ltd" at Bangalore, India. For more information visit http://www.sunshinecorp.biz
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