The tax has become an integral part of the current situation.
The main purpose of this study is to find out how the tax changes in history and the current tax system.
There is a different tax for a different purpose and for a different reason but they all created to finance the government.
They have started tax way back in 1799 where The Britishers collect the tax to fund the war against French and this laid the foundation of modern tax.
In history, most of the tax was collected for funding wars but they have changed the definition of war for the upcoming years.
Nowadays tax is been the main revenue for the government for financing its various activities.
Tax changes over time.
As time changes the collection of tax also changed.
In India there is a different tax like Income tax, VAT, Excise duty etc. but all these taxes are replaced by GST.
But what is tax how it starts and how many taxes are there in India till now?
Before GST there was a vast tax system in India and how GST unite this tax all this we will see in this paper
I will post this Blog in two parts as this topic is more lengthy than I anticipated.
Chapters
1. History of Tax
2. Taxation policy before Independence
3. Taxation policy till GST
4. GST
1. History of Tax
What is mean by Tax?
According to Oxford dictionaries–
“A compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions.”
According to Cambridge Dictionaries–
“Money paid to the government that is based on your income or the cost of goods or services you have bought,"
In simple words, A Tax is a mandatory financial charge or some other levy imposed upon a taxpayer by a governmental organization to fund various public expenditures.
Worlds 1st known tax collected by the British Prime Minister William Pitt the Younger in 1799 to help to cover the cost of his country’s war with France.
Income Tax had also been introduced in this period.
In The US, Tax was started collecting from 1864 because of the Civil war.
In India, the tax system we all know today has been in force by the ancient times they refer various tax measures in both Manu Smriti and Arthasastra .
According to Manu Smriti
The King should arrange the collection of taxes in such a manner that the taxpayer did not feel the pinch of paying taxes. He laid down that traders and artisans should pay 1/5th of their profits in Silver and Gold.
While the agriculturist was to pay 1/6th, 1/8th and 1/10th of the production.
In Arthasastra
Mentioned that each tax was specific and there was no scope for arbitrariness. Tax collectors determined the schedule of each payment and its time, manner and quantity being all pre-determined. They fixed the land revenuevalorem basis.
2. Taxation policy before Independence
In India tax was introduced in 1860, by Sir James Wilson to meet the losses sustained by the government on account of the Military Mutiny of 1857 The Indian debt, which was £51 Million in 1857 rose to £97 Million in 1862.
In 1918, they passed a new Income tax
In 1922 they passed a new act
In 1961-62 numerous amendments were made in the act.
1. Customs duties (Sulka ) which comprise import duty (Pravesya ), Export duty (Nishramya ) and octroi and other tools
2. Transaction tax (Vyaji )
3. Share of production (Bhaga) 1/6th share
4. Tax (Kara) Cash form
5. Taxes in Kind including labour supply of soldiers
6. Countervailing duties or taxes (Vaidharana )
7. Road cess
8. Monopoly tax
9. Royalty
10. Army maintenance tax
Above are few names of taxes which were in India.
Most controversial tax in history was a salt tax. British East India Company imposed a tax on salt.
In 1772 Governor-General Warren Hastings brought the tax to control the companies and in 1780 rate was 2 rupees a mound with a tax of 1.1 to 1.5 rupees a maund
In 1781-82 tax revenue was 29,60,130 rupees
In 1784-85 tax revenue was 62,57,750 rupees
Year
|
Rs. (Million)
|
£ (Million)
|
1929-30
|
67
|
5.025
|
1930-31
|
68
|
5.1
|
1931-32
|
87
|
6.525
|
1932-33
|
102
|
7.65
|
www. wikipedia . org
3. Taxation Policy till GST
As we all know, we have Direct and Indirect taxation policies in India
In this, we will talk about the indirect taxation policy
Indirect tax is a tax that can transfer from one person to another person and the last person on the chain is always get the burden of payment of this tax. Sellers always shift the payment liability to the buyers.
They derive the authority of a levy from the Constitution of India which allocates the power to levy various taxes between the Central and the State
As per Article 265 of Constitution
“No tax shall be levied or collected except by the authority of law”
Therefore, each tax levied or collected has to be backed by an accompanying law, passed either by the parliament or the state legislature.
Tax policy in India is levied by the central and state government and local authorities also impose a tax on the people.
Following is the table of some different taxes imposed on people by both central and state government
1. Service Tax -
Service tax was a tax levied by Central Government of India on service provided or agreed to be provided .
From 1st June 2016 service tax rate
0.5% = education cess and higher education cess
0.5% = Swach Bhart cess
Dr Raja Chelliah committee on tax reforms recommended introducing service tax in 1994.
The flat 5% from 1st July 1994 till 2003 was levied.
On 13th may the service tax structure out at a nominal 5% which is now 15%
The only exemption is when the service provided during the financial year is not more than Rs. 10 lakh
I am presenting the diagram below of service tax revenue in past years (In Crore)
it estimates 2015–16 figure
2. Custom duty -
A customs duty is an indirect tax levied on the import and export of goods in the International trade.
It includes both import and export duties but as export duties contributed only a nominal revenue, due to raising the competitiveness of exports.
Import duties alone made up a major part of the revenue its most probably 10% but it varies
There are different customs duty few as follows
i. Basic Customs Duty
ii. Counter veiling Duty (CVD)
iii. Additional Customs Duty or Special CVD
iv. SafeGuard Duty
v. Anti-Dumping Duty
vi. National Calamity Contingent Duty
vii. Education Cess on Customs Duty
viii. Protective Duty
Press information bureau Govt. of India
Above diagram is Indirect tax collection of Customs, Central Excise & Service tax from April to October 2015 (IN Rs. Crore)
3. Excise duty -
An excise duty is on duty on manufactured goods they levy which at the moment of manufacture,
The basic duty rate has been changed from 12% to 12.5%, however, they have removed education cess and higher education cess
Commodities
|
Collection
in FY 15*
|
Collection
In FY 16*
|
% of excise
Kitty in FY 16
|
Petroleum products
|
1,06,653
|
1,98,793
|
69.23
|
Tobacco products
|
16,676
|
21,463
|
7.47
|
Iron and steel
|
15,970
|
16,632
|
5.79
|
Motor vehicles
|
8,546
|
14,220
|
4.95
|
Cement
|
9,572
|
10,544
|
3.67
|
Machinery
|
3,707
|
6,421
|
2.24
|
Plastics
|
5,150
|
6,092
|
2.12
|
Chemical products
|
5,103
|
5,419
|
1.89
|
CAG
Fig in Rs. crore
4. Central Sales tax (CST) -
CST is a levy of a tax on sales it affects which in interstate trade or commerce.
According to the constitution, any state should not impose a tax on intrastate trade, only central Govt. have authority to do it.
They passed the Central Sales Tax Act 1956 to implementation of the tax and its vary from 5% to 12.5%
I will be posting the second part of this Blog soon.
I must say this guy knows his stuff, I got inspired by him and started by own tax blog Taxcroc
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