Impact of Tax __________________

The point where tax makes its immediate effect felt is known
as the impact of tax

Incidence of Tax __________________

By incidence of taxation is meant final money burden of a tax

or final resting place of a tax.
Direct Tax--

The tax which has incidence and impact both at the same point is the
direct tax. As for example income tax, etc.

Indirect Tax __________________

The tax which has incidence and impact at the different points is the
indirect tax— for example GST tax, etc. These are imposed on either
the producers or the traders, but it is the general consumers who bear
the burden of tax.
Progressive Taxation __________________

This method has increasing rates of tax for increasing value

or volume on which the tax is being imposed. Indian income
tax is a typical example of it.

Regressive Taxation __________________

This is just opposite to the progressive method having

decreasing rates of tax for increasing value or volume on
which the tax is being imposed.
Similar to the methods of taxation the modes of
government expenditure are also of two types
Progressive & Regressive

If the government spending decreases with the increase in

income then it is called as regressive expenditure. On the
other hand if the government spending increases with the
increase in income then it is called as progressive
expenditure.
Which is better - Proressive Exp/Regressive Exp

At first instance it seems that as a country achieves better

levels of development, sectoral and the item-wise expenditure
of the economy must have decreasing trends. But practical
experience shows that the level of expenditure needs
enhancement everyday and economy always needs more
and more revenues to fulfil the rising expenditures.

That is why for economies the best form of government

expenditure is the progressive expenditure.
Tax Expenditure--Tax expenditure is known as revenue
forgone due to various exemptions But such forgone taxes
does not necessarily mean that they have been waived off by
the government. Better, it should be interpreted as incentives
given by the government to promote certain sectors, in
absence of which they may not have come up.

VALUE ADDED TAX------The value added tax (VAT) is a

method of tax collection as well as it was name of a state
level tax in India which subsumed sales tax.
● The name itself suggests that this tax is collected on the
value addition (i.e., production).
● Production of goods or services is nothing but stages of
value additions where production of goods is done by the
manufacturers. From production to the level of sale, there
are many points where value is added in all goods and
services
● there is no chance of imposing tax upon tax which takes
place in the non- VAT method
Same value added taxation system started at central
level in the form of MODVAT (Modified Value Added
Tax)(Modified Value Added Tax) for excise duty

MODVAT scheme was restructured into CENVAT( Central

Value Added Tax)(INPUT ALLOWED FOR SERVICE
TAX&EXCISE DUTY)

MODVAT scheme was restructured into CENVAT( Central

Value Added Tax)
Why GST(GOODS AND SERVICES TAX) was required?

● Before the GST,fiscal powers between the Centre and the

States were clearly demarcated in the Constitution with
almost no overlap between the respective domains.
● The Centre had powers to levy tax on the manufacture of
goods (except alcoholic liquor for human consumption,
opium, narcotics etc.) while the States had powers to levy
tax on sale of goods.
● In case of inter-State sales, the Centre had power to
levy a tax (Central Sales Tax) but the tax was collected
and retained entirely by the originating States
● As for services, it was the Centre alone that was
empowered to levy service tax.
● Implemented from 1st of July 2017
● By amalgamating a large number of Central and State
taxes into a single tax
● the aim was to mitigate cascading or double taxation
in a major way and pave the way for a common
national market.
● From the consumer point of view, the biggest advantage is
in terms of a reduction in the overall tax burden on goods
and services.
● Introduction of GST has also made Indian products
competitive in the domestic and international markets.
● Because of its transparent and self policing character, it is
easier to administer.
SALIENT FEATURES--

The act provides for a levy of GST on supply of all goods

or services except for Alcohol for human consumption.
The tax shall be levied as Dual GST separately but
concurrently by the Union (central tax - CGST) and the
States (including Union Territories with legislatures)
(State tax - SGST) / Union territories without legislatures
(Union territory tax- UTGST).
● The Parliament has exclusive power to levy GST
(integrated tax - IGST) on inter-State trade or commerce
(including imports) in goods or services.
● The Central Government has the power to levy excise duty
in addition to the GST on tobacco and tobacco products.
● The tax on supply of five specified petroleum products
namely crude, high speed diesel, petrol, ATF(Aviation
Turbine Fuel) and natural gas would be levied from a later
date on the recommendation of GST Council
IGST is not a separate tax .it is only a system---
 Dual GST
● India is a federal country where both the Centre and the
States have been assigned the powers to levy and collect
taxes through appropriate legislation. Both the levels of
Government have distinct responsibilities to perform
according to the division of powers prescribed in the
Constitution for which they need to raise resources.

● The CGST and SGST are levied at rates, jointly decided

by the Centre and States. The rates are notified on the
recommendations of the GST Council.
A Goods and Services Tax Council (GSTC) has been
constituted comprising the Union Finance Minister, the
Minister of State (Revenue) and the State Finance
Ministers to recommend on the GST rate, exemption and
thresholds, taxes to be subsumed and other features.

TOTAL 2+29+2=33
● GST COUNCIL-
● QUORUM---50%
● Decisions are taken by a majority of not less than
three-fourth of weighted votes cast.
● Centre would have one-third weightage of the total
votes cast
● All the States taken together would have two-third of
weightage of the total votes cast.
GST would replace the following taxes currently levied and collected by
the Centre:

a. Central Excise Duty

b. Duties of Excise (Medicinal and Toilet Preparations)

c. Additional Duties of Excise (Goods of Special Importance)
d. Additional Duties of Excise (Textiles and Textile Products)
e. Additional Duties of Customs (commonly known as CVD)
f. Special Additional Duty of Customs (SAD)
g. Service Tax
Central Surcharges and Cesses so far as they relate to supply of goods and services
 State taxes that would be subsumed within the GST are

a)State VAT b. Central Sales Tax

c. Luxury Tax
d. Entry Tax (all forms)
e. Entertainment and Amusement Tax (except when levied by the local
bodies)
f. Taxes on advertisements
g. Purchase Tax
h. Taxes on lotteries, betting and gambling
i. State Surcharges and Cesses so far as they relate to supply of goods and
services
● Threshold exemption -
● annual turnover of Rs. 40 lakh(Rs. 20 lakh for special
category States
● Services--20 lakh/10 lakh(special category states)
● Composition scheme-to pay tax at a flat rate without
credits
● An annual turnover of up to Rs. 1.5 crore (discretion to
special category States)
● The threshold exemption and composition schemes are
optional.
● HSN (Harmonised System of Nomenclature) code shall be
used for classifying the goods under the GST regime.

● All Exports and supplies to SEZs (special economic

zone) are zero-rated.
● No tax will be payable on exports of goods or
services, however credit of input tax credit will be
available and same will be available as refund to the
exporters.
BENEFITS OF GST:

(A) Make in India:

(i) Will help to create a unified common national market for

India, giving a boost to Foreign investment and “Make in
India” campaign;

(ii) Will prevent cascading of taxes as Input Tax Credit will be

available across goods and services at every stage of supply;

(iii) Harmonization of laws, procedures and rates of tax;

(iv) It will boost export and manufacturing activity, generate more
employment and thus increase GDP with gainful employment leading to
substantive economic growth;

(v) Ultimately it will help in poverty eradication by generating more

employment and more financial resources;

(vi) More efficient neutralization of taxes especially for exports thereby

making our products more competitive in the international market and give
boost to Indian Exports;

(vii) Improve the overall investment climate in the country which will
naturally benefit the development in the states;
(viii) Uniform SGST and IGST rates will reduce the incentive
for evasion by eliminating rate arbitrage between neighboring
States and that between intra and inter-State sales;

(ix) Average tax burden on companies is likely to come down

which is expected to reduce prices and lower prices mean
more consumption, which in turn means more production
thereby helping in the growth of the industries. This will create
India as a “Manufacturing hub”
GSTN (Goods and Service Tax Network
----A Special Purpose Vehicle.
----It provides a shared IT infrastructure and services to
Central and State Governments, tax payers and other
stakeholders for implementation of GST.
(i) facilitating registration; (ii) forwarding the returns to Central
and State authorities; (iii) computation and settlement of
IGST; (iv) matching of tax payment details with banking
network; (v) providing various MIS reports to the Central and
the State Governments based on the tax payer return
information; (vi) providing analysis of tax payers’ profile; and
(vii) running the matching engine for matching, reversal and
reclaim of input tax credit.
Compliance rating mechanism---

every registered person shall be assigned a compliance

rating based on the record of compliance in respect of
specified parameters. Such ratings shall also be placed in the
public domain. A prospective client will be able to see the
compliance ratings of suppliers and take a decision as to
whether to deal with a particular supplier or not. This will
create healthy competition amongst taxable persons
● Anti profiteering measure----
● the government has constituted the National Anti
Profiteering Authority (NAPA).
● NAPA is required to examine whether input tax credits
availed by any registered person or the reduction in the
tax rate have actually resulted in a commensurate
reduction in the price of the goods or services.
● NAPA has powers to investigate ,impose penalty and
return the amount .
The government has categorised items in five major slabs -
0%, 5%, 12%, 18% and 28%.

The council has decided to keep the highest 28% tax on on luxury
and sinful items

Reverse charge mechanism

E way bill