Introduction to Taxes Overview

Introduction to Taxes

• A tax is a mandatory financial charge imposed on taxpayers (individuals, property owners, businesses) by the government.
• Taxes fund public expenditures and services.

Types of Taxes

• Taxes are classified as direct or indirect.

Direct Taxes

• Direct taxes are imposed directly on the taxpayer.
• The liability and burden are on the same person, and cannot be shifted.
• Examples include: Income Tax, Corporate Tax, Wealth Tax, Estate Duty, Gift Tax, Expenditure Tax, and Fringe Benefit Tax.

Advantages of Direct Taxes

• Progressive in nature (higher income, higher tax)
• Not inflationary, unlike indirect taxes.
• Do not directly affect goods prices.

Indirect Taxes

• Indirect taxes are imposed on the sale, purchase, or use of goods and services, not income or wealth.
• The liability to pay the tax lies on one person, but the burden can be shifted to another (like the consumer).
• Examples include: Goods and Services Tax (GST), Value-Added Tax (VAT), Excise Duty, and Customs Duties.

Types of Indirect Taxes

• Consumption Taxes: Levied on the sale, purchase, or consumption of goods and services (e.g., GST, VAT).
• Production Taxes: Levied on the manufacture or production of goods (e.g., Excise Duty).
• Trade Taxes: Levied on the import or export of goods (e.g., Customs Duties).

Goods and Services Tax (GST)

• A comprehensive indirect tax levied on the supply of goods and services.
• Replaces multiple indirect taxes.
• Destination-based tax, levied at the point of consumption.
• Can have various tax rates (standard, reduced, zero) based on goods/services.
• Recommended by the Kelkar Task Force 2004.

GST Implementation in India

• Timeline of key milestones in the implementation of GST in India, including the introduction of relevant acts.
• Role of the GST Council - the decision-making body for GST matters
• Responsibilities of various stakeholders

Types of GST

• CGST: Central tax applicable on intra-state supplies shared by the Centre.
• SGST: State tax applicable on intra-state supplies shared by the state.
• IGST: Integrated tax applicable on inter-state and import transactions shared by Centre and State.
• UTGST: Union Territory tax applicable on supplies within the Union Territory shared by UT.

Items Excluded from GST

• Petrol
• High-speed diesel
• Aviation turbine fuel
• Crude oil
• Electricity
• Alcohol for human consumption
• Natural gas
• Legal/Court services

Features of GST

• Comprehensive tax
• Elimination of cascading effect
• Burden falls on final consumers
• Destination-based tax
• Tax credit

Importance of GST

• Substitute of bundle of taxes
• Burden on final consumers
• Increase in Tax Compliance
• Removing Cascading Effect
• Tax Credit

Benefits of GST

• Higher threshold for registration
• Reduced tax evasion
• Composition scheme
• Improvement in logistics
• Lesser compliance
• Simple & easy online procedure
• Beneficial to e-commerce operators

Drawbacks of GST

• Inclusion of no consideration supply
• Costly Goods
• Lack of IT infrastructure
• Periodic filings of returns
• Personalized accounting for different states

GST Council

• Structure: Chairperson (Union FM), Vice Chairperson (selected minister), Members (MOS Finance & other ministers with finance or taxation).
• Decision-making process (75% majority for key recommendations).

GST Network (GSTN)

• A government-controlled private limited company.
• Functions as a common pass-through clearing portal.
• Provides registration, filing returns, and tax payment facilities.

Supply Under GST

• Definition of supply (sale, transfer, exchange, barter, rental, lease, disposal)
• Requirement of business activity for consideration

Elements of Supply

• Supply is done for a consideration.
• Supply is done in the furtherance of business activity

Supply for Consideration

• Monetary considerations (cash, cheques, promissory notes, etc.)
• Non-monetary considerations.

Supply in Furtherance of Business

• Business activities
• Supply of goods
• Provision of services

Definition of Business under GST

• Activities undertaken by the government
• Services
• Admission to premises
• Provision of facilities to members

Services Under GST

• Transfer of goods' title or rights
• Land and buildings (rent, lease)
• Treatment/process
• Transfer of business assets
• Renting of immovable property
• Construction of buildings
• Temporary transfer/use/intellectual property right
• Software development
• Agreement to refrain
• Transfer to use assets
• Composite supply
• Supply of goods by unincorporated AOP /BOP

This quiz covers the basics of taxation, including the definitions, classifications, and examples of both direct and indirect taxes. Learn about the characteristics and advantages of direct taxes compared to indirect taxes. Perfect for anyone looking to understand the fundamental concepts of tax policies.