Indirect Tax - Basic Concepts

Mansi Bohra
Flashcards by Mansi Bohra, updated more than 1 year ago
Mansi Bohra
Created by Mansi Bohra about 6 years ago
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CA - IPCC IPCC - Indirect Tax Flashcards on Indirect Tax - Basic Concepts, created by Mansi Bohra on 02/08/2015.

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Define Tax. Pecuniary burden laid upon individuals or property owners in order to support the Government, a payment exacted by legislative authority. A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority". In simple words, tax is nothing but money that people have to pay to the Govt. which is used to provide public services.
Features of Indirect Taxes. 1. Important source of revenue 2. Tax on commodities and services 3. Shifting of burden 4. No perception of direct pinch 5. Wider tax base 6. Inflationary 7. Regressive in nature 8. Promotes social welfare
Constitution of India Supreme law of India. Consists of a Preamble, 22 parts containing 444 Articles and 12 Schedules. Power to levy and collect taxes, whether direct or indirect, emerges from the Constitution.
Article 265 Prohibits arbitrary collection of tax. It states that "no tax shall be levied or collected except by authority of law". The term "authority of law" means that tax proposed to be levied must be within the legislative competence of the Legislature imposing the tax.
Article 245 Said Article provides as under: (i) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the legislature of a State may make laws for the whole or any part of the State. (ii) No law made by the Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation.
Article 246 It gives the respective authority to Union and State Governments for levying tax.
Seventh Schedule to Article 246 It conmtains three lists which enumerate the matters under which the ?Union abd the State Governments have the authority to make laws. List I - Union List List II - State List List III - Concurrent List
List I - Union List It contains the matters in respect of which the Parliament has the exclusive right to make laws.
List II - State List It contains the matters in respect of which the State Legislature has the exclusive right to make laws.
List III - Concurrent List It contains the matters in respect of which both the Parliament & State Legislature have power to make laws.
Income Tax List II - Entry 82 Taxes on income other than agricultural income
Customs Duties List II - Entry 83 Duties of customs excluding export duties
Central Excise Duties List II - Entry 84 Duties of excise on tobacco and other goods manufactured or produced in India EXCEPT alcoholic liquors for human consumption; opium, Indian hemp and other narcotic drugs and narcotics, but INCLUDING medicinal and toilet preparations containing alcohol or opium/Indian hemp/narcotic drugs/narcotics.
Wealth Tax List II - Entry 86 Taxes on capital value of assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies
Central Sales Tax List II - Entry 92A Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of Inter-State trade or commerce
Service Tax List II - Entry 97 Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists
Entry 92C List II - Tax on services [Amendment passed by the Parliament on 15.01.2004, but not yet made effective]
State Level VAT List III - Entry 54 Taxes on the sale or purchase of goods (EXCLUDING newspapers) EXCEPT tax on Inter-State sale or purchase
State Excise Duties List III - Entry 51 Duties of excise on alcoholic liquors for human consumption; opium, Indian hemp and other narcotic drugs and narcotics, but EXCLUDING medicinal and toilet preparations containing alcohol or opium/Indian hemp/narcotic drugs/narcotics.
Excise Duty [Central Value Added Tax (CENVAT)] Central Excise Act, 1944 Central Excise Tariff Act, 1985 A tax on the manufacture of production of goods in India imposed by the Central Government. Basic General Rate: 12%
Customs Duty Customs Act, 1962 Customs Tariff Act, 1975 A duty imposed by the CG on goods imported into/exported out of India. Basic General Rate: 10% + Additional duty of customs (CVD) equivalent to the excise duty levied on like goods produced in India (12%) + Special additional duty of customs @ 4%
Service Tax Chapter V and VA of the Finance Act, 1994 A tax imposed by the CG on the services (EXCEPT the services covered in the negative list of services and exempted services). Rate: 12%
Central Sales Tax Central Sales Tax Act, 1956 A tax on the Inter-State sales of goods, imposed by the CG BUT appropriated by the originating State. Rate: 2%
Value Added Tax VAT Acts of the respective State Governments A tax on the Intra-State sales of goods, imposed by the SGs. Rate generally at 5% and 12.5%/13.5%
Department of Revenue of the Ministry of Finance/Central Board of Revenue Act, 1963 DRMF exercises control in respect of matters relating to all the direct and indirect taxes through two Statutory Boards, namely, CBDT and CBEC, which were constituted under the CBRA, 1963.
CBEC - Administrative authority for its subordinate organizations, including Custom Houses, Central Excise and Service Tax Commissionerates Deals with the tasks of: * Formulation of policy concerning levy and collection of customs and central excise duties and service tax * Prevention of smuggling * Administration of matters relating to customs, central excise, narcotics to the extent under CBEC's purview and service tax
Administration of State Level Indirect Taxes Administered by Commercial Tax Departments of the respective States
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