arfat

8/7/2019 arfat''''''

http://slidepdf.com/reader/full/arfat 1/5

Indirect tax in india

{wicky}

The term indirect tax has more than one meaning.

In the colloquial sense, an indirect tax (such as sales tax, a specific tax [a tax per unit], valueadded tax (VAT), or goods and services tax (GST)) is a tax collected by an intermediary (such as

a retail store) from the person who bears the ultimate economic burden of the tax (such as thecustomer). The intermediary later files a tax return and forwards the tax proceeds to government

with the return. In this sense, the term indirect tax is contrasted with a direct tax which iscollected directly by government from the persons (legal or natural) on which it is imposed.

Some commentators have argued that "a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be."

[1]

An indirect tax may increase the price of a good so that consumers are actually paying the tax by

paying more for the products.[2]

Examples would be fuel, liquor, and cigarette taxes. An exciseduty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately the

manufacturer transfers the burden of this duty to the buyer of the car in form of a higher price.Thus, an indirect tax is such which can be shifted or passed on. The degree to which the burden

of a tax is shifted determines whether a tax is primarily direct or primarily indirect. This is afunction of the relative elasticity of the supply and demand of the goods or services being taxed.

Under this definition, even income taxes may be indirect.

The term indirect tax has a different meaning for U.S. constitutional law purposes: see direct tax

and excise.

Notes

ndirect Tax

Indirect Tax or the tax that is levied on goods or services rather than on persons or

organizations are of different types in India like Excise Duty, Customs Duty, Service Tax, and

Securities Transaction Tax. In India, there are a series of Tax laws and regulations in order tocontrol the indirect taxation, which can be either law, made by the central government or evencan be state specific laws. As a result these taxes are an important part of the total cost. It is thus

essential to make appropriate planning for such costs.

Nearly all of the activities that are subjected to indirect taxation range from manufacturing to

those required for final consumption. Activities related to trading, imports, and services are alsoincluded in this list. As a result Indirect Tax has an impact on all business lines. At present the

8/7/2019 arfat''''''


Indirect Taxes in India are under a transformation due to the changing fiscal reforms of theIndian government. Many new acts and laws are being introduced replacing the old laws and all

related issues, which have become redundant. However, it should be remembered that such newlaws while on one hand would create new opportunities, but also at the same time would lead to

a certain extent of uncertainty and judicial proceedings.

In general, the Indirect Tax in India is a complex system of interconnecting laws and regulations,which includes specific laws of different states. For this there are many reliable organizations in

India, which employs efficient Indirect Tax professionals to help their clients. These taxprofessionals with their in-depth knowledge and wide-ranging experience offers effective

planning methods to their clients in order to help in their cost minimization. The IndirectTaxation regime encompasses various types of taxes like Sales Tax, Service Tax, Custom and

Excise Duties, VAT and Anti-Dumping Duties, and the organizations provide services in allthese related fields.

In the recent year, the Indian government has undertaken significant reform of indirect taxation

system. This includes the initiation of a region-based and state-level VAT on goods. However, itshould be noted that as taxes still forms a barrier to inter-state trading in order to attain a secured

market for the activities related to services and goods more reform is needed. Some of thereforms that can be introduced for a better indirect taxation system in India are -

y The serialized set of Indirect Taxes so far activated at the central and state levels should

be amalgamated and treated as a single tax.y The integrated Indirect Tax should be neutral at all levels such that chances of

fraudulence would be minimizedy The Central Sales Tax, which obstructs easy trading between different states, is being

under the process of termination that would help to abolish the control measures on theinter-state trade

By the year 2010 the Indian government has planned to activate a goods and services tax neutral

at all levels in order to fulfill these objectives. The government can undertake either anintroduction of a national VAT or a system, which would permit both a state VAT, or a central

VAT. Along with this if the government also can incorporate a central VAT that can be rebated,on the trade across the boundary lines, then there would be minimum chances of fraudulence.

Definition of Income Tax

Ads by Google Expat Tax Returns Online

Expat Tax Forms 2555, 1116, 8854 File US Non Resident Individual Tax www.expatriatetaxreturns.com

Income Tax Saving Plans

From MetLife. Invest today & Ensure your Take Home is More- Know More. MetLife.net.in/Save_Income_Tax

8/7/2019 arfat''''''


QUICK LOOK

y Taxes in India are of two types, Direct Tax and Indirect Tax.

y Direct Tax, like income tax, wealth tax, etc. are those whose burden falls directly on the

taxpayer.

y The burden of indirect taxes, like service tax, VAT, etc. can be passed on to a third party.

Income Tax is all income other than agricultural income levied and collected by the central

government and shared with the states.

According to Income Tax Act 1961, every person, who is an assessee and whose total incomeexceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates

prescribed in the finance act. Such income tax shall be paid on the total income of the previousyear in the relevant assessment year.

The total income of an individual is determined on the basis of his residential status in India.

R esidence Rules

An individual is treated as resident in a year if present in India

I. for 182 days during the year or

II. for 60 days during the year and 365 days during the preceding four years. Individuals fulfilling neither of these conditions are nonresidents. (The rules are slightly more liberal for Indian citizens residing abroad or leaving India for employment abroad.)

A resident who was not present in India for 730 days during the preceding seven years or whowas nonresident in nine out of ten preceding yeas I treated as not ordinarily resident. In effect, a

newcomer to India remains not ordinarily resident.

For tax purposes, an individual may be resident, nonresident or not ordinarily resident.

Non-R esidents and Non-R esident Indians

Residents are on worldwide income. Nonresidents are taxed only on income that is received inIndia or arises or is deemed to arise in India. A person not ordinarily resident is taxed like a

nonresident but is also liable to tax on income accruing abroad if it is from a business controlled

in or a profession set up in India.

Capital gains on transfer of assets acquired in foreign exchange is not taxable in certain cases.

Non-resident Indians are not required to file a tax return if their income consists of only interest

and dividends, provided taxes due on such income are deducted at source.

It is possible for non-resident Indians to avail of these special provisions even after becoming

8/7/2019 arfat''''''


residents by following certain procedures laid down by the Income Tax act.

Taxability of individuals is summarised in the table below

Status Indian Income Foreign Income

Resident and ordinarily resident Taxable Taxable

Resident but not ordinary resident Taxable Not Taxable

Non-Resident Taxable Not Taxable

Indirect taxCharge levied by the State on consumption,

expenditure, privilege, or right but not onincome or property. Customs duties levied on imports, excise duties on production, sales tax or

value added tax (VAT) at some stage in production-distribution process, are examples of indirecttaxes because they are not levied directly on the income of the consumer or earner. Since they

are less obvious than income tax (because they don't show up on the wage slip) politicians aretempted to increase them to generate more state revenue. Also called consumption taxes, they are

regressive measures because they are not based on the ability to pay principle.

Indirect Tax System India

Indirect Taxes Pre R eforms The indirect tax structure was extremely irrational between the reforms. The Constitution gives

the permission to levy a multitude of indirect taxes. But the most important ones are customs andexcise duties charged by the Central government and sales tax excepting inter state sales tax to

be charged by the state government. The indirect taxes levied by the centre like customs, exciseand central sales tax and the major indirect taxes levied by the states and civic bodies like

passenger and goods tax, electricity duty and octroi when taken together did not present arational system.

Indirect Taxes Post R eforms

y Even post reforms, the indirect tax regime in India is still in the early stages of growth.Both the Central and State governments charge a multitude of indirect taxes. The central

government charges tax on goods at the point of import (Customs duty), manufacture(Excise duty), inter state sales (Central sales tax or CST) and on provision of services

(Service tax).

8/7/2019 arfat''''''


y The state governments charge tax on goods sold within the state (Sales tax/Value AddedTax or VAT), and on the goods that enter the state (Entry tax).

y In the present scenario corporate would have to analyze the tax cost involved in atransaction, have enough backup documentation to support their tax positions and keep

looking for ways for tax maximization.

India Budget 2008

Indirect Taxes As per the Ministry Of Finance there has been significant development in planning for

introducing the goods and services tax (GST) from April 1 2010.As a first step the rate of centralsales tax (CST) is under proposal to be decreased to 2 per cent from April1 2008.The general rate

of central value added tax (CENVAT) has been decreased from 16 per cent to 14 per cent acrossall goods

Documents

arfat