Have you ever wondered why India is always leading ahead of other countries in terms of growth? However, we do not see any progress on ground zero. Currently India’s GDP (gross domestic product) growth rate to 7.2 per cent in 2018-19 from 6.7 per cent in the previous fiscal.
This is because the kind of tax we pay. In short, we the people of this country are making the economy stable.
Amid the daily hustle and bustle of life, we tend to give a blind eye to the taxes we pay. However, we should know where our hard-earned money is actually going and what all taxes we are paying as a citizen of India.
Here’s a list of taxes people in India pay
1. Direct Tax
Taxes which are paid directly by individuals and organisations to the government of India come under Direct Tax. Taxes which are paid under Direct Tax include, Personal Income Tax, Capital Gains Tax, Securities Transaction Tax, Perquisite Tax, Corporate Income Tax, Marginal Tax, Rate Tax on Agricultural.
2. Indirect Tax
Service Tax which is incurred indirectly by the government of India are provided by firms and servicing companies in lieu of monetary benefit. The Central Government via the Finance Act, 1994 governs the taxability of services provided by an individual or a company under Section 66B. Service tax is charged at the rate of 15% currently. The taxability arises once the value of services exceeds Rs. 10 lakhs during the financial year.
3. Goods and Services Tax
Goods and Services Tax (GST) is an indirect tax (or consumption tax) levied in India on the supply of goods and services. It is levied at every step in the production process.
The tax is divided into five slabs — 0 per cent, 5 per cent, 12 per cent, 18 per cent, and 28 per cent.Although GST is collected by the central government, taxes on petroleum products, alcoholic drinks, electricity are separately collected by the state government.
Taxes imposed by Central Government
1. Income tax
Besides agricultural income, Income Tax is mainly collected by the central government. It is imposed on individuals or entities (taxpayers) that varies with respective income or profits (taxable income).
2. Custom Duty
Collected by Central Board of Excise and Customs (CBEC) under the Department of Revenue, the Ministry of Finance, Government of India, Custom Duty is levied on goods imported in India as well as exported from India.
The Constitutional provisions have given to Union the right to legislate and collect duties on imports and exports.
3. Excise Duty
Central Excise duty is an indirect tax levied on those goods which are manufactured in India and are meant for home consumption. The taxable event is ‘manufacture’ and the liability of central excise duty arises as soon as the goods are manufactured. It is a tax on manufacturing, which is paid by a manufacturer, who passes its incidence on to the customers.
The term “excisable goods” means the goods which are specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 , as being subject to a duty of excise and includes salt.
In India, Excise Duty is applied to these goods namely,
- Petroleum crude
- High-speed diesel
- Motor spirit (commonly known as petrol)
- Natural gas
- Aviation turbine fuel
- Tobacco and tobacco products.
4. Corporation Tax
Company whether Indian or foreign is liable to taxation, under the Income Tax Act,1961. Corporation tax is a tax which is levied on the incomes of registered companies and corporations.
Companies in India, whether public or private are governed by the Companies Act, 1956. The registrar of companies and the company law board administers the provisions of the Act.
The government divides it between two sub-categories:
Domestic company [Section 2(22A)]
An Indian company (i.e. a company formed and registered under the Companies Act,1956) or any other company which, in respect of its income liable to tax, under the Income Tax Act, would have to pay the tax.
A domestic company may be a public company or a private company.
Foreign company [Section 2(23A)]
A company whose control and management are situated wholly outside India, and which has not made the prescribed arrangements for declaration and payment of dividends within India.
1. Electricity Duty
Although the taxes are collected by the central government, Electricity Tax may vary from state to state.
2. Value Added Tax (VAT)
One of the important components of tax reforms initiated since liberalization is the introduction of Value Added Tax (VAT). The VAT is a multi-point destination-based system of taxation, with tax being levied on value addition at each stage of the transaction in the production/ distribution chain.
The VAT is basically a State subject, derived from Entry 54 of the State List, for which the States are sovereign in taking decisions. The State Governments, through Taxation Departments, are carrying out the responsibility of levying and collecting the VAT in the respective States. While the Central Government is playing the role of a facilitator for the successful implementation of VAT. The Ministry of Finance is the main agency for levying and implementing VAT, both at the Centre and the State level.
The Department of Revenue, under the Ministry of Finance, exercises control in respect of matters relating to all the direct and indirect taxes, through two statutory Boards, namely, the Central Board of Direct Taxes (CBDT) and the Central Board of Customs and Central Excise (CBEC).
The term ‘value addition’ implies the increase in the value of goods and services at each stage of production or transfer of goods and services. The VAT is a tax on the final consumption of goods or services and is ultimately borne by the consumer.
It is a multi-stage tax with the provision to allow ‘Input tax credit (ITC)’ on tax at an earlier stage, which can be appropriated against the VAT liability on the subsequent sale.
This input tax credit in relation to any period means setting off the amount of input tax by a registered dealer against the amount of his output tax. It is given for all manufacturers and traders for the purchase of inputs/supplies meant for sale, irrespective of when these will be utilised/ sold.
The VAT liability of the dealer/ manufacturer is calculated by deducting input tax credit from tax collected on sales during the payment period (say, a month).
3. Sales Tax
It is the tax which is paid to the government for the sales of products and services. Sales tax is of different types depending upon the sale of product from manufacturer to wholesaler or retailer to the customer.
4. Entertainment Tax
In India, a tax is imposed on things related to entertainment such as for movie tickets, festivals, commercial shows, amusement parks etc. and the revenue goes to the state government.
5. Toll Road Tax
Also called as turnpike or tollway, toll tax is a fee paid by the passerby. The toll is collected to recover the cost of road construction, maintenance etc.