582353110-Economics-project-taxation-class-12th.pptx

Taxation project

1. ST. ANSELM’S SR. SEC. SCHOOL, AJMER SUBMITTED BY: HARSH GUPTA CLASS: XI I COMMERCE ROLL NO.: 4055 SUBMITTED TO: ARTI GUPTA

2. ACKNOWLEDGEMENT It gives me immense pleasure in expressing my deep gratitude Rev. Fr. Nelson V. principle of st. anselm's sr. sec. school ajmer who provided me platform to reveal my creativity, i would also like extend my greatest thanks to Mrs. Arti Gupta (PGT Commerce), my teacher in economics for her valuable guidance throughout the work on the topic and making it useful. I am thankful to my who directly or indirectly helped me throughout. My gratitude to my beloved parents, whose instant encouragement and support has helped me in completing my project in scheduled period . with honor and regards Teacher’s sign __________________

3. Certificate This is to certify that Harsh Gupta of class 11 Commerce has Successfully completed this project under my supervision. He has taken keen interest and shown utmost sincerity in completion Of this project . He has successfully completed the project work Economics upto my satisfaction. Teacher’s Signature

4. TAX SYSTEM AND TAX REFORMS INDIA

5. INDEX INTRODUCTION TYPES OF TAXES TYPES OF DIRECT TAX IN INDIA TYPES OF INDIRECT TAX BEFORE INTRODUCTION OF GST IN INDIA GST TAXES REPLACED BY GST TAXES NOT REPLACED BY GST TAX REFORMS IN INDIA CONCLUSION

6. WHAT IS TAXATION ? The Central and State government plays a significant role in determining the taxes in India. To streamline the process of taxation and ensure transparency in the country, the state and central governments have undertaken various policy reforms over the last few years. One such change was the Goods and Services Tax (GST) which eased the tax regime on the sale and deliverance of goods and services in the country.

7. TYPES OF TAXES

8. TYPES OF TAXES The tax structure in India can be classified into two main categories: Direct Tax:  It is defined as the tax imposed directly on a  taxpayer  and is required to be paid to the government. Also, an individual cannot pass or assign another person to pay the taxes on his behalf. Indirect Tax: It is defined as the tax levied not on the income, profit or  revenue  but the goods and services rendered by the taxpayer. Unlike direct taxes, indirect taxes can be shifted from one individual to another. Earlier, the list of indirect taxes imposed on taxpayers included service tax, sales tax,  value  added tax (VAT), central excise  duty  and customs duty.

9. Types of Direct Taxes in India The various types of direct taxes levied on citizens by the Government Of India are as follows : 1)  Corporate Tax Under the Indian Income Tax Act, 1961, both Indian as well as foreign organizations are liable to pay taxes to the government. The corporate tax is levied on the net profit of domestic firms. Also, foreign corporations whose profits appear or are deemed to emerge through their operations in India are also liable to pay taxes to the Government of India. The income of a company, be it in the form of dividends, interest and royalties, is also taxable. At present, companies having gross turnover up to Rs.250 crore are liable to pay corporate tax at 25% of the net profit while companies with a gross turnover of more than Rs.250 crore are liable to pay the corporate tax at 30%. Apart from this, other types of corporate tax include the following:

10. Minimum Alternative Tax (MAT):  MAT is imposed on “zero tax companies”, which typically refer to companies that declare little or no income in order to save tax. Fringe Benefits Tax (FBT):  The FBT tax is imposed on the fringe benefits like drivers and maids provided/paid for by companies to their employees. Dividend Distribution Tax (DDT):  An amount that is declared, distributed or paid as dividend to the shareholders by a domestic company is taxed under the Dividend Distribution Tax. It is applicable to domestic companies only. Foreign companies distributing dividends in India do not pay this tax (such dividends are taxable in the hands of the shareholder). Securities Transaction Tax (STT):  The SST is imposed on the income which the companies get through taxable securities transactions. This tax is free of any surcharge.

11. 2) Income Tax Income tax is perhaps the most well known direct tax imposed by the government on annual income generated by businesses and individuals. The income tax on income generated by the business houses is known as Corporate Tax. Income tax is calculated as per the provisions of Income Tax Act, 1961 and is directly paid to the central government on an annual basis. The income tax rate depends on the net taxable income or the tax bracket. Income tax may be deducted in the form of TDS (tax deducted at source) in case of salaried employees. However, in case of self-employed individuals, the tax is payable on the basis of declared income as per their Income Tax Return subsmission . ITR is basically a statement of income and the tax liability (on the basis of income declared) which is submitted to the Income Tax Department in the prescribed format Income tax is levied on various sources of income including Income from salaries, from capital gains, from business, income from house property or other sources.

12. 3) Capital Gains Tax The capital assets of an individual refer to anything owned for personal use or for the purpose of an investment. For businesses, the capital asset is anything that can be used for more than a year and is not intended to be sold or liquidated during the course of business operation. Machinery, cars, homes, shares, bonds, art, businesses and farms are some of the examples of capital assets. The capital gains tax is imposed on the income derived from the sale of investments or assets. On the basis of the holding period, capital tax is categorised under short-term gains and long-term gains. The formula to calculate the capital gains is: Capital Gains = Sale Value – Purchase Value The capital gain is considered as Long Term Capital Gain (LTCG) if Real Estate Property is sold after 2 years of holding period Debt funds or any other asset with a holding period of more than 3 years Equity investments/equity mutual funds with a holding period of more than 1 year

13. TYPES OF INDIRECT TAX BEFORE INTRODUCTION OF GST IN INDIA Service Tax in India Service Tax is a tax which is levied on the Services provided by an entity. If an entity is providing any service, they are required to levy Service Tax on the same. This service tax is collected from the recipient of service and deposited with the Central Govt. To read more about Service Tax, you may refer this article on  What is Service Tax and Current Rate of Service Tax in India . Service Tax is levied on all services except the Services specified in the  Negative List of Services . Apart from this,  Service Tax Exemption  is allowed to Small Scale Service Providers if the Total Value of Services provided by them during the year is less than Rs. 10 Lakhs.

14. 2. Excise Duty in India Excise Duty is an indirect tax levied on those goods which are manufactured in India. The taxable event in this case 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 the manufacturer, who passes its incidence on to other customers and recovers the same from them. The rules and provisions as mentioned in the Central Excise Act, 1944 are applicable for the levy of excise duty in India. This tax is also levied by the Central Govt.

15. 3 . VAT in India VAT stands for Value Added Tax and is levied on the sale of movable goods in India. VAT is a multi-point destination based system of taxation, with tax being levied on value addition at each stage of transaction in the production/ distribution chain. The term ‘value addition’ implies the increase in value of goods and services at each stage of production or transfer of goods. VAT is a tax on the final consumption of goods or services and is ultimately borne by the consumer 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 VAT in the respective States

16. 4. Customs Duty in India Customs Duty is a type of Indirect Tax which is levied on goods which are imported into India. In some cases, it is also levied when the goods are exported from India. In India, the basic law for levy and collection of customs duty is Customs Act, 1962  .   It provides for levy and collection of duty on imports and exports, import/export procedures, prohibitions on importation and exportation of goods, penalties, offences, etc . 5. Securities Transaction Tax (STT) Securities Transaction Tax or STT is a type of Indirect Tax which is levied at the time of sale/purchase of securities through the Indian Stock Exchanges. These securities include Shares, Mutual Funds, F&O Transactions etc.  Securities Transaction Tax  was introduced in India by the 2004 Budget and is applicable with effect from 1 st  April 2004. The reason for the introduction of Securities Transaction Tax was to lower the tax on short term capital gains and to make the long term capital gains exempted from the levy of any tax.

17. 6. Stamp Duty Stamp Duty  is an indirect tax levied by the State Govt’s on the transfer of immovable property located in their state. It is also levied by the Govt on all Legal Documents. The Stamp Duty Rates vary from State to State. 7. Entertainment Tax In India,  Entertainment Tax is levied on every financial transaction  that is related to entertainment and is reserved primarily for the state governments. Some forms of entertainment on which entertainment tax is levied include Amusement Parks, Video Games, Arcades, Exhibitions, Celebrity Stage Shows, Sports Activities etc. Apart from the above mentioned Indirect Taxes, there are several other Indirect Taxes in India as well like Luxury Tax, Sales Tax, Octroi etc.

18. INTRODUCTION OF GST The GST journey began in the year 2000 when a committee was set up to draft law. It took 17 years from then for the Law to evolve. In 2017, the GST Bill was passed in the Lok Sabha and Rajya Sabha. On 1st July 2017, the GST Law came into force.

19. What is GST in India? GST is known as the Goods and Services Tax. It is an indirect tax which has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017. In other words, Goods and Service Tax (GST)  is levied on the supply of goods and services. Goods and Services Tax Law in India is a  comprehensive, multi-stage, destination-based tax  that is levied on every  value addition.  GST is a single domestic indirect tax law for the entire country. Before the Goods and Services Tax could be introduced, the structure of indirect tax levy in India was as follows:

20. COMPONENTS OF GST There are three taxes applicable under this system:  CGST, SGST & IGST . CGST:  It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra) SGST:  It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra) IGST:  It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)

21. Transaction New Regime Old Regime Revenue Distribution Sale within the State CGST + SGST VAT + Central Excise/Service tax Revenue will be shared equally between the Centre and the State Sale to another State IGST Central Sales Tax + Excise/Service Tax There will only be one type of tax (central) in case of inter-state sales. The Centre will then share the IGST revenue based on the destination of goods. in most cases, the tax structure under the new regime will be as follows :

22. 1.Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers  online , which would make compliance easy and transparent.  2.Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words,  GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business . 3. Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is  minimal cascading of taxes . This would reduce hidden costs of doing business. 4. Improved competitiveness: Reduction in transaction costs  of doing business would eventually lead to an improved competitiveness for the trade and industry. World Bank believes that the implementation of the Goods and Service Tax (GST), combined with dismantling of inter-state check-posts, is the most crucial reform that could improve competitiveness of India’s manufacturing sector. 5 . Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system,  GST would be simpler and easier to administer  than all other indirect taxes of the Centre and State levied so far.

23. TAXES REPLACED BY GST THE CENTRAL TAXES REPLACED BY GST Central excise duty Central sales tax Service tax Additional duties of customs Additional duties of excise Excise duty levied under the textiles and textile products THE STATE-LEVEL TAXES REPLACED BY GST Purchase tax Central sales tax VAT Surcharge and CESS Entry tax Taxes on lottery, gambling and betting Taxes on advertisements

24. TAXES NOT REPLACED BY GST Custom Duty The Countervailing Duty ( CVD ) and Special Additional Duty ( SAD ) will subsume under GST, but the Basic Customs Duty ( BCD ) will be charged according to current law only and not GST. 2. Stamp Duty The buyer has to the pay stamp duty for the registration of the property, and GST will not cover Stamp duty and will be subsumed as per the tax levied by the government. 3. Vehicle Tax GST does not cover road tax, so the Vehicle Tax will not be charged under GST, and will remain under the  Motor Vehicle Act .

25. 4 . Excise on Liquor For the time being, Liquor has been kept outside the GST. Alcohol needs a constitutional amendment to be brought under the ambit GST. Though Industry Experts suggest, the GST will impact the sector negatively in the future. 5. Tax on Sale and Consumption of Electricity GST will not affect the Electricity Bills as of now, and the existing tax system of VAT and Central Excise will prevail on Electricity Bills. The state will charge the  VAT  and Centre will levy the  Central Excise . 6 . Entry Taxes and Toll GST will not cover the Toll Tax as such taxes like road tax, toll tax, environment tax and others are directly paid by users and will be levied by States directly. 7 . Entertainment Tax (Levied by Local Bodies) The imposition of the extra tax by local bodies is not covered under GST. Hence, in addition to 28 per cent GST, the local body extra tax will lead to  Double Tax . This will indirectly lead to a sharp increase in the price of the tickets. 8. Road Tax GST will not cover the Road Tax as such taxes like toll tax, road tax, environment tax and others are directly paid by users and will be levied by States directly.

26. What is Tax Reform? Tax reform is a policy implementation by the government through which few alterations are made into the tax system in order to overcome the loopholes and enhance the effectiveness of the tax administration in the country in order to generate higher revenues from taxes as compared to the overall spending. Explanation Tax reform, as the name suggests, is a kind of reform made in the tax system of a nation that can help the government of the same in minimizing the  chances of tax evasion  and avoidance. It brings sustainability in the revenue levels, addresses issues and conflicts concerning inequality employing behavior change and redistribution, and also aids in the development of a nation.

27. Purpose Tax reform is introduced for multiple purposes. The first and foremost purpose is to minimize the slightest of probabilities of avoidance and evasion of the tax from the economy. Another purpose is to induce a higher rate of sustainability in the revenue levels and directing the public investments into desired avenues by means of providing  tax deductions, tax breaks , and tax exemptions. The ultimate purpose is to enhance the overall functioning of the tax system and bring economic growth in the country.

28. Objectives Tax reform is introduced to fulfill multiple objectives. It aims at improving the efficiency of the tax administration and allowing it to become more systematic by: Decreasing the  marginal tax rates . Lowering the tax implication of savings and investment; Lowering the occurrence and probabilities of  tax avoidance  and tax evasion; Lowering the total number of tax defaulters; Improving economic decision-making; Lowering the cost involved and time required to organize, plan and implement the change in the tax system; Uniform treatment in the case of industries, investments, and properties.

29. Types of Tax Reform Basically three different types include :

30. Individual Income Tax Reform  can be learned as a strategy that is used for eliminating the income expenditures and  payroll taxes  incurred by an individual. Corporate Income Tax Reform  can be learned as a strategy that is used for administering the  corporate income taxes  and avoid distortions that take place on account of special provisions and also boosts the economic growth and development of an economy. Other Reform Proposals  are used to create and introduce new types of taxes in the tax system for replacing or supplementing the current taxes.

31. Effects of Tax reform The effects of such reform may not be the same for all taxpayers and economies too. On the one hand, It might enhance the functioning of the tax system while, on the other hand, it paves ways for political pressures that are short term in nature. These reforms have somehow contributed to the creation of certain tax incentives that has ultimately lead to the distortion in the economy and have even marginalized not just the efficiency of the tax system but has also allowed it to become more fair and transparent as compared to what it used to be earlier. Need for Tax reform There has always been an undying need for the changes in the tax system. The collection of taxes is necessary for funding the services that are arranged and provided by the government of a country. The tax system must be efficient enough for the collection of a sufficient amount of revenues and boosting the economic growth of a country. No matter how systematic the tax system of a country is,  the taxpayers  will find a way by identifying and taking advantage of the loopholes in the system and avoid/ evade taxes. As a result of this, the need has risen and ensures that the tax administration of a nation is totally organized.

32. Benefits Reduces marginal tax rates; Ensures that there is the same treatment for all, whether it’s a property, industry, or an investment. Tax reform ensures that the rate of tax evasion and avoidance gets lowers down. It ensures that the tax structure gets fully organized. It simplifies tax laws and encourages compliance. It widens the tax base and reduces per capita tax by dividing the tax burden by bringing more and more taxpayers under the umbrella.

33. Limitations Ignores the fact that it is the impact of the overall tax administration that is important and not just individual taxes. It makes the tax system more complicated. It ignores the fact that the slightest of change in the tax system can have a huge impact on the masses. Tax reform focuses on strengthening the current tax system and widens out the tax base. Tax reform aims at enhancing the efficiency of the overall tax system by lowering  marginal tax rates , reducing taxation on investment and savings, boosting the economic development of the nations, lowering the number of tax defaulters, etc.