Author, Athar Mudasir.
Overview of GST Introduction Taxation is one of the vital components of development of any country. The revenue from taxation is used to finance public goods and services such as infrastructure, sanitation, transportation and all other amenities which are provided by the government. From the view of economists, a tax is a non-penal, yet compulsory transfer of resources from the private to the public sector levied on a basis of predetermined criteria and without reference to specific benefit received. Each rupee of tax contributed helps Government to provide better infrastructure, rural revival and social well-being. Taxation is also considered as a major tool available to Government for removing poverty and inequality from the society. On the other hand, tax reform is an essential component of any comprehensive strategy for structural adjustment & the resumption of growth. (Chibber&khalilzadehShirazi 1988) There are two types of taxes which are levied in India and they are; Direct tax, which is levied directly to an individuals income in the form of Income Tax and Indirect tax, that is paid indirectly by the final consumer of goods and services while paying for purchase of goods or for enjoying services. Although the immediate liability to pay tax falls upon another person such as manufacturer, provider of services or seller of goods. Constitution of India is the foundation and source of powers to legislate all laws in India. The authority to levy a tax is derived from the Constitution of India which allocates the power to levy various taxes between the Central and the State. Article 246 of the Indian Constitution, distributes legislative powers including taxation, between the Parliament of India and the State Legislatures. In the previous tax regime, the Centre had the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States had the powers to levy tax on the sale of goods. In the case of inter-State sales, the Centre had the power to levy a tax (the Central Sales Tax) but, the tax was collected and retained entirely by the States. As for services, it was the Centre alone that was empowered to levy service tax. Broadly, the previous Indirect tax regime can be looked at from the point of view of Central and State laws. For the Central Government, Central Excise, Customs and Service tax were the three main components of indirect taxes. While for State Government, Value Added Tax (VAT) and CST were the major taxes along with Octroi, Entertainment Tax etc. Introduction of the Value Added Tax was considered to be a major step and important breakthrough in the sphere of indirect tax reforms in India. Despite the success of VAT, there were certain shortcomings in the structure of VAT. The reasons for such shortcomings were the form of mosaic of taxes being levied on goods and services, such as luxury tax, entertainment tax, etc., not subsumed in the VAT thereby marginalizing the benefits of comprehensive tax credit mechanism. The previous tax regime has remained inefficient in fully removing the cascading effect of taxes. Besides, there were several other taxes, which both the Central Government and the State Government levied on production, manufacture and distributive trade, where no set-off was available in the form of input tax credit. These taxes added to the cost of goods and services through "tax on tax" which the final consumer had to bear.
Overview of GST Introduction Taxation is one of the vital components of development of any country. The revenue from taxation is used to finance public goods and services such as infrastructure, sanitation, transportation and all other amenities which are provided by the government. From the view of economists, a tax is a non-penal, yet compulsory transfer of resources from the private to the public sector levied on a basis of predetermined criteria and without reference to specific benefit received. Each rupee of tax contributed helps Government to provide better infrastructure, rural revival and social well-being. Taxation is also considered as a major tool available to Government for removing poverty and inequality from the society. On the other hand, tax reform is an essential component of any comprehensive strategy for structural adjustment & the resumption of growth. (Chibber&khalilzadehShirazi 1988) There are two types of taxes which are levied in India and they are; Direct tax, which is levied directly to an individuals income in the form of Income Tax and Indirect tax, that is paid indirectly by the final consumer of goods and services while paying for purchase of goods or for enjoying services. Although the immediate liability to pay tax falls upon another person such as manufacturer, provider of services or seller of goods. Constitution of India is the foundation and source of powers to legislate all laws in India. The authority to levy a tax is derived from the Constitution of India which allocates the power to levy various taxes between the Central and the State. Article 246 of the Indian Constitution, distributes legislative powers including taxation, between the Parliament of India and the State Legislatures. In the previous tax regime, the Centre had the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States had the powers to levy tax on the sale of goods. In the case of inter-State sales, the Centre had the power to levy a tax (the Central Sales Tax) but, the tax was collected and retained entirely by the States. As for services, it was the Centre alone that was empowered to levy service tax. Broadly, the previous Indirect tax regime can be looked at from the point of view of Central and State laws. For the Central Government, Central Excise, Customs and Service tax were the three main components of indirect taxes. While for State Government, Value Added Tax (VAT) and CST were the major taxes along with Octroi, Entertainment Tax etc. Introduction of the Value Added Tax was considered to be a major step and important breakthrough in the sphere of indirect tax reforms in India. Despite the success of VAT, there were certain shortcomings in the structure of VAT. The reasons for such shortcomings were the form of mosaic of taxes being levied on goods and services, such as luxury tax, entertainment tax, etc., not subsumed in the VAT thereby marginalizing the benefits of comprehensive tax credit mechanism. The previous tax regime has remained inefficient in fully removing the cascading effect of taxes. Besides, there were several other taxes, which both the Central Government and the State Government levied on production, manufacture and distributive trade, where no set-off was available in the form of input tax credit. These taxes added to the cost of goods and services through "tax on tax" which the final consumer had to bear.
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