Tax Reforms in India

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  • Topic: Tax, Taxation, Indirect tax
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  • Published : June 24, 2012
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TAX REFORMS IN INDIA
* About :-
Tax reform is the process of changing the way taxes are collected or managed by the government. Tax reformers have different goals. Some seek to reduce the level of taxation of all people by the government. Some seek to make the tax system more progressive or less progressive. Others seek to simplify the tax system and make the system more understandable, or more accountable . Numerous organizations have been set up to reform tax systems worldwide, often with the intent to reform income taxes or value added taxes into something considered more economically liberal. Others propose tax systems that attempt to deal with externalities. Georgism claims that various forms of land tax can both deal with externalities and improve productivity.

* Taxation in India:-

India has a three-tier tax structure, wherein the constitution empowers the union government to levy income tax, tax on capital transactions (wealth tax, inheritance tax), sales tax, service tax , customs and excise duties and the state governments to levy sales tax on intrastate sale of goods, tax on entertainment and professions, excise duties on manufacture of alcohol, stamp duties on transfer of property and collect land revenue (levy on land owned). The local governments are empowered by the state government to levy property tax and charge users for public utilities like water supply, sewage etc. More than half of the revenues of the union and state governments come from taxes, of which 3/4th come from direct taxes. More than a quarter of the union government's tax revenues Is shared with the state governments. The tax reforms initiated in 1991, have sought to rationalise the tax structure and increase compliance by taking steps in the following directions: * Reducing the rates of individual and corporate income taxes, excises, customs and making it more progressive * Reducing exemptions and concessions

* Simplification of laws and procedures
* Introduction of permanent account number (PAN) to track monetary transactions * 21 of the 28 states introduced value added tax (VAT) on 1 April 2005 to replace the complex and multiple sales tax system The non-tax revenues of the central government come from fiscal services, interest receipts, public sector dividends, etc., while the non-tax revenues of the States are grants from the central government, interest receipts, dividends and income from general, economic and social services.

3. Some quantitative and institutional features of main taxes:-

India has a tax structure with a three-tier federal structure (the union government, the state governments and the urban/rural local bodies). The power to levy taxes and duties is distributed between the union government and the state governments in accordance with the provisions of the Indian Constitution4. The state government may delegate any of its fiscal powersto local authorities that do not have any constitutionally reserved powers of taxation. Themain taxes/duties that the union government is empowered to levy are: income tax (except taxon agricultural income, which the state governments can levy), customs duties, excise duties(except on alcoholic liquors or narcotics), sales tax and service tax. The principal taxes leviedby the state governments are sales tax (tax on intra-state sale of goods), stamp duty (duty ontransfer of property), state excise (duty on manufacture of alcohol), land revenue (levy onland used for agricultural/non-agricultural purposes), duty on entertainment and tax on professions& callings. The local bodies are empowered to levy tax on properties (buildings,...
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