TAXATION

WHAT IS TAX?

Tax is a fee charged by a Government on a product, income or on carrying certain activity. Further, the taxes are classified into two categories i.e.DIRECT TAXES & INDIRECT TAXES.
DIRECT TAXES: -When tax is directly levied on the income or wealth of the person, it is called as DIRECT TAX. E.g.:- Income Tax.
INDIRECT TAXES: -When tax is indirectly levied i.e. by the way of the goods and services received, it is called INDIRECT TAXES. E.g.:- Goods And Service Tax (GST), Excise duty, Custom Duty, etc.

DIRECT TAXES    Vs. INDIRECT TAXES

The burden of the Direct Tax cannot be shifted from one person another. In other words the person is personally liable to pay the tax on his own Income.    Unlike Direct Tax, the burden of tax can be shifted from one person to another in the value chain of supply.            
Direct Taxes are Progressive in nature. In other words, tax rate is according to the class of income. Whereas Indirect Taxes are Regressive in nature. The tax rate is equal for all class for people whether able to pay or not.
Direct Taxes does not lead to inflation.    On other hand Indirect Taxes leads to inflation making the goods & services expensive.

WHY TAXES ARE LEVIED?
Taxes serve as the major revenue to the government for the upliftment and development of the nation as whole. This is used for infrastructural development, health care facilities, subsides, education facilities, etc. It is the Backbone of the Revenue.
WHO LEVIES TAXES?
With regard to the Indian Constitution, the power to levy and collect the tax rests with the Central Government, State Government, and Union Government.
Seventh Schedule of the Article 246 contains three lists empowering the authority to levy tax. They are as follows:-
Union list: - In this list the Central Government is considered as the authority to frame rules for tax.
State list: - In this list the State Government is considered as the authority to frame rules for tax.
Concurrent list: - In this list Central Government and State Government both are considered as the authorities to frame rules for tax.

•    Now let us begin with the further understanding TAX.

INCOME TAX
It was introduced in the year 1961.The Income Tax Act is applicable to whole India including Jammu & Kashmir. The power to make send amend rules is in the hands of CBDT i.e.Central Board of Direct Tax. It contains various sections, sub-sections, clauses, provisions for the computation of the tax. The act contains the taxable area of all the possible transactions which have been dealt so far. Also the law has some lucrative provisions relating to the having low income. The people engaged in agricultural activities are kept outside the purview of tax subjected to certain conditions.

Heads of Income:-

1)Income from Salaries – For the people under the employment earning Salary & perquisites as their income.
2)Income from House Property – For the people who earn by way of Rentals.
3)Income from Business & Profession – For the people who are engaged in Business & Profession. In this Profession includes Vocation.
4) Income from Capital Gains – Related with the transactions of sale & purchase of assets & securities.
5) Income from Other Sources– It is the residual category of the transactions which are not covered in above heads e.g. Winning from lottery,etc.

All the persons are liable to pay tax according to their transactions in the respective heads.In the Parlance of Income Tax Act a person includes:-
Individual
* HUF
* AOP
* BOI
* Company
* Partnership Firm including LLP
* Co-operative Society
* Local Authority
* any other Artificial Person.
* A person who is liable to pay tax is known as Assesse.
Before going for the tax rates, we shall first understand the terms PY & AY
PY means the period in which the income in earned by a person in previous year.
AY is the Assessment Year of the accounts of the Previous Year.
For this computation the financial year is considered as from 1st April to 31st March of next year.

TAX RATES FOR DIFFERENT CATEGORIES OF PERSONS
For Individuals:-
Having income equal to or below basic exemption limit (250000) - No tax is payable
from 250001-500000 = 5 %
from 500001-1000000 = 20%
above 1000000 = 30%
This type of tax rate is called as Slab Rate.
Note: - Relevant for AY 18-19.
Companies and Firms have to follow the Flat Rate Tax System. 30% Tax in case of partnership firm & 30% in case of corporates
In other words the tax rate is fixed irrespective of quantum of Income.

ADDITIONAL DUTY
Every individual assesse earning above 5000000 in a particular financial year has to pay on additional duty of 10% known as surcharge.15% of income exceeds 10000000.
The similar rule is for company assesses also having separate specified limits.
After computing the tax liability, additional cess is to be named Education Cess. It is 3% of the total tax amount. This amount is used for providing education to children in backward areas.

The government has made certain exemptions i.e. items not to be considered as a list of taxable income e.g. Agricultural Income. Also, there are certain benefits from tax in the form of Deductions mentioned in the chapter VI of Income Tax Act. E.g. Deduction of the Life Insurance Policy, Interest on saving accounts,etc.

There are certain expenses which are   specifically disallowed for the computation of tax and the tax liability as per accounting treatment and the provisions of Income Tax may differ, therefore Accounting Standard-22ACCOUNTING FOR TAXES ON INCOME has been introduced.

Considering all the related provisions Assesse has to file the return of income. Important Dates for furnishing return of income is as follows:-
30th Sept, for the corporate assesses & assesses eligible for Audit under section 44 & where audit is mandatory under any other Act.
30th Nov, for the assesses involving in transactions of Transfer Policy with Related Parties.
31st July for remaining categories of persons.

Upon the non-filling of return, penal provisions shall attract. Hence, to file the return of income is a good practice being an aware and responsible citizen of India. The return of income shall be filed by the assesse on its own or by the practicing Chartered Accountant. For filing the return a person is recognized by its PAN (Permanent Account Number) by the income tax department. Now, Aadhar Card has to be linked with PAN without which the return is not uploaded.
Income Tax is a very vast topic covering all three aspects of income at large. This was just a summarized information on Income Tax.

Now let us begin with the understanding of Indirect Tax.

GOODS & SERVICE TAX

It has been more than a decade since the Idea of national goods and service tax was mooted by Kelkar Committee in the year 2004. There were certain procedures that took up the way to be implemented. Finally, It has been implemented from 1st of July, 2017.
Prior to GST the taxes levied in the form of indirect taxes were VAT, Central Service Tax, Custom, Sales Tax, Excise Duty, Entertainment Tax, etc. There were certain drawbacks in the pre reformed taxes such as cascading effect, non-availment of credit to the dealers on Interstate Transactions. GST itself has subsumed all the taxes in it. Also it is the cure for all the deficiencies.
France is the first country which started GST about 62 years back.
India has adopted the Dual GST concept which is concurrent imposed by State & Central Government simultaneously on Goods as well as on services.

WHO IS LIABLE TO PAY GST?
Every person having aggregate Turnover of more than 20 lakhs in any financial year is liable to register under GST and pay tax to government. He has to file return every month. However, the limit can be 10 lakhs in certain states on some specific businesses.  
COMPOSITION SCHEME: - in order to make relax to small class of dealers, Government has introduced the scheme of composition where the taxable person has to file returns quarterly at concessional rate.

RATES IN GST
Goods and services are divided into five tax slabs for collection of tax - 0%, 5%, 12%, 18% and 28%. Petroleum products and Alcoholic drinks are taxed separately by the individual state governments. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products.

COMPUTATION OF GST
Transactions made within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State governments. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government. GST is a consumption-based tax/destination-based tax, therefore, taxes are paid to the state where the goods or services are consumed not the state in which they were produced. IGST complicates tax collection for State Governments by disabling them from collecting the tax owed to them directly from the Central Government. Under the previous system, a state would only have to deal with a single government in order to collect tax revenue.

GSTN COMMON PORTAL
GSTN is the official website of the Government accessible to all the person. It is the platform for the government officials to interact with registered persons. The portal provides facilities of Registration, Filing of returns, uploading of invoices, payment of taxes, etc.  

Article By:-
Sunil Madnani.