What is Taxation?  Types of Taxation

Tax is a mandatory financial charge or some other type of levy imposed upon a tax payer by a Government organization in order to fund various public expenditures.

Taxes are 2 types

Direct Taxes: Taxes which are collected directly from income and wealth are known as Direct Taxes Eg: Property Tax, Stamp Duty

Indirect Taxes: It is a tax which is imposed on goods and services sold.  It is usually added to the cost of the good or service and charged from the ultimate consumer.  The seller shall file a return to the Government on all the taxes he has collected from the consumer. Eg: Sales Tax or VAT at some stages in production-distribution process, CST, Customs duties levied on imports, excise duties on production

Types of Indirect Taxes

• Central Government Taxes
  • Excise Duty on Manufacturing
  • Service Tax on Services
  • CST on Inter State Sales
  • Custom Duty on Imports
• State Government Taxes
  • VAT on sales within states
  • Entertainment Tax on Entertainment
  • Luxury Tax – On Luxury Hotels
  • Octroi/Entry Tax on Transport of Goods

GST as One Tax for One Nation

Goods and Services Tax (GST) is the biggest indirect tax reform of India. GST will subsume Central Excise Law, Service Tax Law, State VATs, Entry Tax, Luxury Taxes etc.

Earlier, there were so many taxes which were levied on goods such as Excise, VAT, entry tax/octroi.  Similarly, service tax, entertainment tax, luxury tax were levied on services. Now, there will be only single tax i.e. GST and it will make dream of One Nation, One Tax feasible

GST is one indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services. GST is a destination based tax which is levied only on value addition at each stage because credits of input taxes paid at procurement of inputs will be available. 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

Benefits of GST System

Replaces many major Indirect Taxes

Removes Cascading Effect (Tax on Tax)

Controls Black Money

Makes India as Common Market

Supports and tries to develop Make in India

Eases transport goods from one state to another

Introduction of the idea of invoice matching