8

Project Title
STUDY ON INDIAN TAX STRUCTURE

Submitted In Partial Fulfillment of the Requirements

For The Award of the Degree Of

Bachelor of Commerce (B.Com)

Submitted by
Priya Nayak
Enrollment No. A80304619008
B.COM (Semester V)

Guided by
Dr. Tanushree Gupta
(Assistant professor)

AUGUST 2021

Submitted to:

AMITY BUSINESS SCHOOL

AMITY UNIVERSITY, CHHATTISGARH, INDIA

 Declaration by the Candidate

I Priya Nayak hereby declare that the Project Work with the title STUDY ON
INDIAN
TAX STRUCTURE submitted by me for the partial fulfillment of the degree of B.COM
is my original work and has not been submitted earlier to any other University /Institution
for the fulfillment of the requirement for any course of study.

I also declare that no chapter of this thesis in whole or in part has been incorporated in this
report from any earlier work done by others or by me. However, extracts of any literature
which has been used for this report has been duly acknowledged providing details of such
literature in the references.

Signature of the student

Name: Priya Nayak

Registration No: A80304619008

1
2
 Certificate By institute

This is to certify that this project report entitled “ STUDY ON INDIAN

TAX STRUCTURE ” for “ Agrawal & Dora ; chartered Accountants

” is a bonafide work carried out by “ Priya Nayak ” of B.COM of AMITY

BUSINESS SCHOOL for fulfillment of B.COM degree course of AMITY
UNIVERSITY Raipur.

Dr. Tanushree Gupta Prof. (Dr.) Sumita Dave

Assistant professor
Director, Amity Business School,
Raipur, Chhattisgarh

Date:

3
 Certificate by the Examiner

This is to certify that the project entitled “ STUDY ON INDIAN

TAX STRUCTURE ” submitted by

“Priya Nayak” Enrollment No A80304619008

Has been examined by the undersigned as a part of the examination for the award
of Bachelor of Commerce degree of AMITY UNIVERSITY,
CHHATTISGARH (C.G.).

Name of the Examiner Signature of the Examiner

Date:

4
 Acknowledgement

I would like to take this opportunity to express my sincere gratitude to each and every person who
have helped me and guided me towards the right direction while the completion of this project. I would
like to express my thanks to Dr. Tanushree gupta for her guidance, time and support during the making
of the project
I would like to express my special thanks and gratitude to CA Manish Kunar Agrawal for their
immense guidance and support during internship period.
I would also like to express my heartfelt gratitude to all those respondent who have spared their time
to provide me with the valuable information.

5
 Abstract/Summary/Preface

This is the internship report based on the thirty days long internship program that I had successfully
completed in Agrawal & Dora (CA Firm) . Raipur under Accounting Department from 07.06.2021 to
07.07.2021 as a requirement for my partial fulfillment for the award of degree of Bachelor's Degree
Of Business Commerce (HONS.) in Amity University Chhattisgarh, Raipur. As being completely new
to practical, corporate world setting, every hour spent in the Taxation dept. gave me some amount of
experience all the time all of which cannot be explained in words. But nevertheless, they were all
useful for my career.
This report was made right after the completion of my Internship at a Agrawal & Dora (CA Firm), the
learning and the experience gained helped me to stay motivated to complete this project. The purpose
of this report is to shed more light on Taxation, give context to how the Indian taxation structure is
working. The taxation system in India is such that the taxes are levied by the Central Government and
the State Governments. Some minor taxes are also levied by the local authorities such as the
Municipality and the Local Governments.

6
CHAPTER
TITLE PAGE NO.
NO.
DECLARATION BY THE CANDIDATE I
CERTIFICATE BY THE ORGANIZATION
II
CERTIFICATE BY INSTITUTE
III
CERTIFICATE BY THE EXAMINER
ABSTRACT IV
LIST OF FIGURES
V

VI

Introduction
I 1.1 Introduction 9-15
1.2 Need, Objectives and Importance of Study

Company Profile 16-17

II

Review of Literature 18- 20

III

IV Research Methodology 21-22

Data Analysis and Interpretations

5.1 Introduction
5.2 Analysis of data
5.3 Interpretation of data
V 23-32
Analysis of Observation And Interpretations (For
Observation Method)
5.1 Introduction
5.2 Interpretation of Observation

VI Conclusion 33-34

7
VII Managerial Implication 35-36

VIII Limitation and Future Scope 37-43

IX References / Bibliography 44-45

APPENDICES

46-50
Weekly Progress Report (WPR)

8
 CHAPTER-I

INTRODUCTION

9
 TAXATION IN INDIA

Taxes in India are levied by the Central Government and the State Governments by virtue of powers
conferred to them from Constitution of India. Some minor taxes are also levied by the local authorities
such as the Municipality. The entire system is clearly demarcated with specific roles for the central and
state government. The Central Government of India levies taxes such as customs duty,income
tax, service tax, and central excise duty.
The taxation system in India empowers the state governments to levy income tax on agricultural
income, professional tax, value added tax (VAT), state excise duty, land revenue and stamp duty. The
local bodies are allowed to collect octroi, property tax, and other taxes on various services like drainage
and water supply.
The authority to levy a tax is derived from the Constitution of India which allocates the power to levy
various taxes between the Center and the States. An important restriction on this power is Article 265
of the Constitution which states that "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. Nonetheless, tax evasion is a massive problem in India,
ultimately catalyzing various negative effects on the country.

HISTORY OF TAXATION

Although views on what is appropriate in tax policy influence the choice and structure of tax codes,
patterns of taxation throughout history can be explained largely by administrative considerations. For
example, because imported products are easier to tax than domestic output, import duties were
among the earliest taxes. Similarly, the simple turnover tax (levied on gross sales) long held sway
before the invention of the economically superior but administratively more demanding VAT (which
allows credit for tax paid on purchases). It is easier to identify, and thus tax, real property than other
assets; and a head (poll) tax is even easier to implement. It is not surprising, therefore, that the first
direct levies were head and land taxes.
Although taxation has a long history, it played a relatively minor role in the ancient world. Taxes
on consumption were levied in Greece and Rome. Tariffs—taxes on imported goods—were often of
considerably more importance than internal excises so far as the production of revenue went. As a
means of raising additional funds in time of war, taxes on property would be temporarily imposed.
For a long time these taxes were confined to real property, but later they were extended to other
assets. Real estate transactions also were taxed. In Greece free citizens had different tax obligations

10
from slaves, and the tax laws of the Roman Empire distinguished between nationals and residents of
conquered territories.

PURPOSE F TAXATION

During the 19th century the prevalent idea was that taxes should serve mainly to finance
the government. In earlier times, and again today, governments have utilized taxation for other than
merely fiscal purposes. One useful way to view the purpose of taxation, attributable to American
economist Richard A. Musgrave, is to distinguish between objectives of resource allocation, income
redistribution, and economic stability. (Economic growth or development and international
competitiveness are sometimes listed as separate goals, but they can generally be subsumed under the
other three.) In the absence of a strong reason for interference, such as the need to reduce pollution,
the first objective, resource allocation, is furthered if tax policy does not interfere with market-
determined allocations. The second objective, income redistribution, is meant to lessen inequalities in
the distribution of income and wealth. The objective of stabilization—implemented through tax
policy, government expenditure policy, monetary policy, and debt management—is that of
maintaining high employment and price stability.

TYPES OF TAXATION

Taxation applies to all different types of levies. These can include (but are not limited to) :

• Income tax: Governments impose income taxes on financial income generated by all entities
within their jurisdiction, including individuals and businesses.
• Corporate tax: This type of tax is imposed on the profit of a business.
• Capital gains: A tax on capital gains is imposed on any capital gains or profits made by
people or businesses from the sale of certain assets including stocks, bonds, or real estate.
• Property tax: A property tax is asses by a local government and paid for by the owner of a
property. This tax is calculated based on property and land values.
• Inheritance: A type of tax levied on individuals who inherit the estate of a deceased person.
• Sales tax: A consumption tax imposed by a government on the sale of goods and services.
This can take the form of a value-added tax (VAT), a goods and services tax (GST), a state or
provincial sales tax, or an excise tax.

11
 TYPES OF TAXES

1. Direct taxes

Direct Tax is levied directly on individuals and corporate entities. This tax cannot be
transferred or borne by anybody else. Examples of direct tax include income tax, wealth tax,
gift tax, capital gains tax.

Income tax is the most popular tax within this section. Levied on individuals on the income
earned with different tax slabs for income levels. The term ‘individuals’ includes individuals,
Hindu Undivided Family (HUF), Company, firm, Co-operative Societies, Trusts.

2. Indirect taxes

Indirect taxes are taxes which are indirectly levied on the public through goods and services.
The sellers of the goods and services collect the tax which is then collected by the
government bodies.

• Value Added Tax (VAT)– A sales tax levied on goods sold in the state. The rate depends on

the government.

• Octroi Tax– Levied on goods which move from one state to another. The rates depend on the

state governments.

• Service Tax– Government levies the tax on service providers.

• Customs Duty– It is a tax levied on anything which is imported into India from a foreign

nation.

3. Goods and Service Tax (GST)

As a significant step towards the reform of indirect taxation in India, the Central Government has
introduced the Goods and Service Tax (GST). GST is a comprehensive indirect tax on
manufacture, sale and consumption of goods and services throughout India and will subsume
many indirect taxes levied by the Central and State Governments. GST will be implemented
through Central GST (CGST), Integrated GST (IGST) and State GST (SGST).

12
 Revenue Authorities

CBDT
The Central Board of Direct Taxes (CBDT) is a part of the Department of Revenue under the Ministry of
Finance. This body provides inputs for policy and planning of direct taxes in India and is also responsible
for administration of direct tax laws through the Income Tax Department.
CBEC
The Central Board of Excise and Customs (CBEC) is also a part of the Department of Revenue under the
Ministry of Finance. It is the nodal national agency responsible for administering customs, central excise
duty and service tax in India.
CBIC
Under the GST regime, the CBEC has been renamed as the Central Board of Indirect Taxes & Customs
(CBIC) post legislative approval. The CBIC would supervise the work of all its field formations and
directorates and assist the government in policy making in relation to GST, continuing central excise levy
and customs functions.

Role of the Central and State Government

The entire system is clearly demarcated with specific roles for the central and state government. The
Central Government of India levies taxes such as customs duty,income tax, service tax, and central
excise duty.
The taxation system in India empowers the state governments to levy income tax on agricultural
income, professional tax, value added tax (VAT), state excise duty, land revenue and stamp duty. The
local bodies are allowed to collect octroi, property tax, and other taxes on various services like
drainage and water supply.

Benefits of Taxation

Benefit taxation is a system in which individuals are taxed according to the benefits they receive
from public expenditures. This paper describes an alternative to the Standard Lindahl method of
determining the distribution of individual benefits from government-provided public goods, and
uses this alternative to calculate benefit taxes. This alternative avoids some of the paradoxial
features of Lindahl pricing, and generates outcomes in which all consumers benefit from reduced

13
 costs of providing public goods. An illustrative calculation shows that benefit taxes defined in this
way may be quite regressive.

Benefits of Taxes

While paying taxes may not be a pleasant feeling, however, it is prudent to understand that tax paid
by every single individual contributes towards the country’s administration and resources required
for its economic progress.

1. It promotes savings as well as investments. If an individual makes certain set of investments,

a part amount of the same would be tax exempted, thereby enabling him or her to pay reduced

amount of taxes.

2. Paying tax also works as a proof that you are not only disciplined in filing your tax returns but

also helps at the time of loan application. This is because at the time of purchasing a home

loan, the bank requires proof of whether the applicant has filed his or her taxes regularly.

Need, Objectives and Importance of Study

Conducting a study is an integral part of learning about life. Why Is Research Important? The main
purpose of research is to inform action, to prove a theory, and contribute to developing knowledge
in a field or study. A study must be both valid and reliable because those are two aspects that
determine the quality of a study, and more importantly, the quality of information obtained by the
study. If a study is unreliable, we cannot know whether or not we can apply the information
provided by the study to another situation. If a study is not valid, we cannot be sure whether or not
the information provided by the study is true or not.

14
The Development of any country’s economy depends directly on the Country’s Taxation
Structure. A Taxation Structure which facilitates easy of doing business and having no chance for
tax evasion brings prosperity to a country’s economy. On the other hand taxation structure which
has provisions for tax evasion and the one which does not facilitate ease of doing business
slows down the growth of country’s economy. Therefore as taxation structure plays an important
role in country’s development. There is always need for study of the taxation structure to make
the Taxation structure more simple that earlier.

The importance of study:

• A Tool for Building Knowledge and for Facilitating Learning

• Means to Understand Various Issues and Increase Public Awareness
• An Aid to Business Success
• A Way to Prove Lies and to Support Truths
• Means to Find, Gauge, and Seize Opportunities
• A Seed to Love Reading, Writing, Analysing, and Sharing Valuable Information
• Nourishment and Exercise for the Mind

Objectives of study :

• To Study the Tax Structure of India

• To Identify the different taxes Collected
• To Identify the amount incurred on collection of taxes
• To Identify the amount of revenue which is collected from different types of taxes
• To Identify problems in the existing taxation structure

15
 CHAPTER-II

COMPANY PROFILE

16
 Company Profile

Agrawal & Dora Chartered Accountants placed in Devendra Nagar, Raipur, Chhattisgarh 492001,
and Agrawal & Dora Chartered Accountants took a good position in the accountant category in
Raipur. If you live in Raipur or some where near to Raipur than it will be all in one destination for
you. In @Model.PlaceCategory. Name Agrawal & Dora Chartered Accountants established a
good reputation while working Over the course of its history. Over the course of its journey, this
business has established a firm foothold in it’s industry. The belief that customer satisfaction is as
important as their products and services, have helped this establishment garner a vast base of
customers, which continues to grow by the day. This business employs individuals that are
dedicated towards their respective roles and put in a lot of effort to achieve the common vision
and larger goals of the company. In the near future, this business aims to expand its line of
products and services and cater to a larger client base.
To get the success on there business customer satisfaction is necesaary and this company trying to
achieve this while proposing there products and services to the customer. This company has
people who are dedicated to their respective roles and work hard to achieve the shared vision and
broader goals of the company. In the near future, this business aims to expand its range of
products and services and serve a larger customer base. In Raipur, this company has a high status
in Raipur. you can reach this destination easily as Agrawal & Dora Chartered Accountants can be
found in various navigation tools like: Google map. It is known to offer superior services in the
following categories: accountant, accounting services, accounting services outsourcing services.

Products and Services offered:

Agrawal & Dora Chartered Accountants in Raipur Ganj has a wide range of products and / or services
to cater to the varied requirements of their customers. The staff at this establishment are courteous and
prompt at providing any assistance. They readily answer any queries or questions that you may have.
This establishment is functional from 11:00 - 19:00.

17
 CHAPTER-III

LITERATURE RIVEW

18
Growth literature very recently acknowledges the role of taxation in the growth process of an
economy. Until recently, growth models are more concerned with the steady-state process and
exogenous changes. On the theoretical ground, taxation does not have any impact on growth
(Myles 2000). Development of endogenous growth models creates the space for fiscal policy
especially tax policy in determining the growth performance. Barro (1990), King and Rebello (1990)
and Jones et al. (1993) were the pioneer in this regard. Tax level and tax structure have an impact on
the saving behaviour of the household and investment in human capital. On the other hand, the firm
also changes its investment decisions and innovations following tax policies (Johansson et al. 2008).
These decisions and incentives in the accumulation of physical and human capital create the
‘Growth’ disparities amongst the countries and state economies.

A large body of literature available on “Tax-Growth” relationship is mostly dedicated to cross-

country settings (Martin and Fardmanesh 1990; Karras 1999; Myles 2000; Tosun and
Abizadeh 2005; Johansson et al. 2008; Vartia et al. 2008; Arnold 2011; Szarowska 2013;
Macek 2014; Stoilova 2017; Safi et al. 2017; Durusu-Ciftci 2018) that investigates the effect of tax
policy on economic performance. Income and corporation taxes are the major tax instruments for the
governments irrespective of the level of developments of a country. The formation of tax structure
with these two taxes has many implications in the growth performance. The study made by Arnold et
al. (2011), Macek (2014) and Dackehag and Hansson (2012) has explored the negative relation of
income and corporation tax with growth performance. Vartia et al. (2008) find the negative impact of
corporation tax for OECD countries. If we consider the average and marginal tax rate, marginal tax is
very influential than to average tax rate in investment decisions and labour supply. Empirical studies
prove that marginal tax has a negative relation with growth, which indicate raising of marginal tax
rate is associated with compromises with growth performance (Padovano and Galli 2001; Lee and
Gordon 2005; Poulson and Kaplani 2008). Studies also established that other type of taxes also has a
significant impact on growth performance, like consumption tax (Johansson et al. 2008; Durusu-
Ciftci 2018), GST and Payroll (Tosun and Abizadeh 2005), property tax (Xing 2011), labour tax
(Szarowska 2014), sales tax (Ojede and Yamarik 2012), excise (Reynolds 2006), etc.

However, looking at the single country’s perspective, we find very little evidence on the same.
Stockey and Rebelo (1995) with the use of the endogenous growth model study the role of tax
reforms on U.S. growth performance. They have found that tax reforms have very minor implication
with economic outcomes. There are several studies exist for US economy where they empirically try
to establish the link between tax and growth. Atems (2015) finds the spatial spillover effect of
income taxes on the growth of 48 contiguous states. On the other hand, Ojede and Yamarik (2012)
have not found any kind of impact of income taxes on growth in these states. Their panel pool mean
group estimation indicates that property and sales tax has detrimental consequences in development.
With the use of data for the U.S. covering the period of 1912–2006, Barro and Redlick (2009) find
that average marginal income taxes were halting the economic growth. However, they have provided
an interesting argument that in wartime, the tax does not have any kind of relation with growth. In
search of an answer to the question that whether corporate tax rise destroys jobs in the U.S.,
Ljungqvist and Smolyansky (2016) use firm-level data for the period 1970–2010. The main
conclusion of the paper is that a rise in corporate tax is not good for employment and income and has
very little impact on economic activity. Using the error correction model, Mdanat et al. (2018) find
for Jordan that income tax, corporation tax and personal tax negatively impact the growth. They
suggest that irrespective of tax collection, the prime focus of the government should be social justice

19
of the people. Dladla and Khobai (2018) also find similar results for South Africa where income
taxes are coming out to be negative. For the case of Italy, Federici and Parisi (2015) used the 880
firms’ data and results show that corporation tax is bad for investments with the consideration of both
effective average and marginal taxes rates.

Looking at the literature, the empirical relationship of tax structure with growth performance is still
unclear for India. This study attempts to fill the gap by examining the effect of tax policy on
economic performance in an emerging economy such as India at the state level. Second, with the use
of panel Pool Mean Group (PMG) estimator which assumes slope homogeneity in the long run and
heterogeneity in the short run, we can incorporate the dynamic behaviour of the variables which will
be new to tax structure–growth study in India. Third, the tax–growth nexus may show a non-linear
relationship due to the threshold effect. We consider this non-linearity in our panel regression model
which will be a contribution to the existing literature.

Tax is the major source of revenue for the government, the development of any country's economy
largely depends on the tax structure it has adopted. A Taxation Structure which facilitates easy of
doing business and having no chance for tax evasion brings prosperity to a country's economy. On
the other hand taxation structure which has provisions for tax evasion and the one which does not
facilitate ease of doing business slows down the growth of country's economy. Therefore as taxation
structure plays an important role in country's development. India has a well-developed tax structure.
The power to levy taxes and duties is distributed among the three tiers of Government, in accordance
with the provisions of the Indian Constitution. Indian taxation structure has gone through many
reforms and still it is very far ahead from being a ideal taxation structure. Many problems like Tax
Evasion, Reliance on indirect taxes, Black money, existence of parallel economy show that Indian
taxation system requires some major reforms in the future ahead to address all this problems. In the
following paper, the study is purely based on secondary data. Various figures are obtained from the
different websites of government of India. It is seen that there are various number of taxes and
different tax collection authorities in India. Also it is seen that there is major dependence on indirect
taxes for tax collection than the direct taxes. Both Indirect taxes and Direct taxes have their own
advantages and disadvantages.

20
 CHAPTER-IV

RESEARCH METHODOLOGY

21
Research methodology is the specific procedures or techniques used to identify, select, process, and
analyze information about a topic. In a research paper, the methodology section allows the reader to
critically evaluate a study’s overall validity and reliability. The Research Methodology refers to the
systematic and theoretical analysis of the research methods applied to a field of study that combine
the techniques and approaches of the used tools for conducting a scientific research study.
This Research paper is purely based on secondary data. Various figures are obtained from the
different websites of government of India.

Tax scholars using typical doctrinal and reform-oriented methodologies often struggle to articulate
the process undertaken in their research and at the same time, these methods often require an analysis
of legislation that has already been the subject of judicial inquiry. However, this raises the challenge
of what method to employ in the absence of such judicial inquiry. The tax environment has become
so dynamic that law reform occurs rapidly and the law has to be researched, in the absence of case
law post legislative amendment. This article provides tax scholars with a methodological approach
described as a structured pre-emptive analysis that overcomes this problem (in other words an
adaptation of typical doctrinal reform-oriented approaches). Using an exemplar of an actual tax law
problem, the paper demonstrates how to conduct rigorous research in the absence of case law dealing
with legislation that is the subject of enquiry. The article makes two contributions. First, it gives
transparency to the traditional doctrinal reform-oriented methods primarily used in law. Second, it
illustrates a method that can be used to overcome the absence of case law.

22
 CHAPTER V

DATA ANALYSIS AND INTERPRETATIONS

23
 DATA ANALYSIS

ollowing are the details of the amount raised from Direct Taxes and Indirect taxes by combined both central
and state governments

Year 2010-11 2011-12 2012-13 2013-14

Revenue Receipt 450822.09 501394.92 574680.54 679297.56
Direct Tax

Revenue Receipt 820843.26 820843.26 1151867.99 1353191.51

Indirect Tax

1353191.51 Source- (Public Finance Statistics ,Ministry of Finance, 2013-14)

*2014-15 data is not taken as it is not yet available

24
INTERPRETATION OF DATA

From the above data it is seen that there is more dependence on indirect taxes for revenue
collection than direct taxes It is almost clear from the above graph that the amount received from
Indirect taxes is almost double from the amount received from direct taxes Over dependence on
Indirect Taxes is clearly visible We will be understanding the Advantages and Disadvantages of
both Indirect and direct taxes

Advantages of Indirect taxes

1. Convenient:- Indirect taxes are imposed on Manufacturers, sellers ad traders but their
burden is imposed on the consumers of the goods and services and thus this consumers
are the final tax payers. They are convenient from point of view as tax payer as he
pays indirect taxes in small amounts. Also they are convenient to government as they
collect these taxes in lumpsum from the manufacturers.

2. Difficult to evade:- As in many cases the selling price is inclusive of indirect taxes , it is
very difficult to evade these taxes.

3. Wide Coverage:- Indirect taxes have more wide coverage than the direct taxes as majority
of the goods and services have indirect taxes included in their price. So the consumers have
to pay them Elastic:- Some of the indirect taxes are elastic in nature, when government
wants to raise the revenue, they increase the indirect taxes.

4. Universality:-Indirect taxes are paid by both rich and poor people so they have the
universal appeal.

5. Pattern of Production:- By Imposing taxes on certain commodities or sectors, government

can control the pattern of production.

25
 6. Individuals may not demotivated to work and save:- As indirect taxes are not depend on
Income, Individuals may not get demotivated to work and save.

Disadvantages of Indirect Taxes

1. Inequitable:- The Burden of Indirect Taxes is more on poor people than Rich People.
Hence Indirect Taxes are considered to be Inequitable.

2. Uneconomical:- As government has to make a lot of expenses for collection of the

Indirect Taxes, This Taxes are Considered as uneconomical. Final Consumer has to
pay much higher amount than received by the government.

3. Uncertainty:- Amount of Indirect Tax Collection cannot be predicted as increase in

Indirect Tax Results in Increase in Prices of the commodity and thus reduces the
demand of the commodity. Hence there is always uncertainty over the amount of
indirect taxes collected.

4. Inflationary:- As Indirect Taxes increases the prices of the commodity, they are
considered as Inflationary. If Government depends more on indirect taxes, then Inflation
will keep on increasing. Non-Awareness:- There is lack of awareness among the tax payers
of Indirect taxes as no body knows that he is paying taxes as it is included in the price.

5. Evasion:- There is more chance of Tax Evasion as Manufacturers can collect taxes from
people and pay only fewer taxes with the understanding of government officials.

6. Discourage Industries:- The raw material used by the industrial sector is taxed indirectly.
Similarly Finished goods are taxed which increases the price of the product resulting
in demand reduction. In this way indirect taxes discourage industries.

7. Unfair Profit:- The Producers increase prices of commodities to maintain there profit
margin. Hence burden is on consumers.

26
 8. Unemployment:- Due to Increase in prices, demand gets reduced discouraging
industries as a result of which Unemployment increases. Similarly Direct Taxes also
have their own advantages and disadvantages

Advantages of Direct taxes

1. Equitable:- The Burden of direct taxes cannot be shifted hence they are progressive and
equitable in nature.

2. Economical:- The Cost of collection of direct tax is low. Mostly they are collected at
source. Hence the direct taxes are economical.

3. Certain:- There is certainty on the amount of direct taxes to be collected from both the
sides. Tax Payers know their income and thus know the amount of taxes they would be
required to pay. Similarly tax authorities also know about the income expected from direct
taxes.

4. Productive:- Direct Taxes are Productive in nature. As the community grows in numbers
and prosperity, the returns from direct taxes also grow.

5. Means of developing civic sense:- In case of Direct taxes the people know that they are
paying taxes and it develops consciousness among the people. They know their right to
ask government how the government is using the money for development of the nation.
Thus Direct Taxes Increases the civic consciousness.

Disadvantages of Direct taxes

27
 1. Inconvenient:- Direct Taxes Pinches the payer. The direct taxes are thus inconvenient.
Nobody can help feeling the pinch.

2. Evadable:- A taxpayer can submit false return and evade the taxes. Hence direct taxes are
tax on honesty. Honest people are suffered more in direct taxes than the dishonest people.

3. Social conflict:- Direct tax encourages social conflict as not every part members of the
society has to pay direct taxes.

4. Discourage Saving and Investment:- Excessive increase in direct taxes may discourage
savings and investment which in long term will affect country’s economy.

Proportion of different direct taxes under direct taxes heading for the year 2013-14.

28
Source:-(Public Finance Statistics ,Ministry of Finance, 2013-14)

Interpretations:-

The Major amount of Indirect taxes is Coming from Corporation Tax and Taxation on Income i. e 62
% and 35 % respectively. All other sources constitute up to 3 % Share of Direct Taxes.

Proportion of different Indirect taxes under Indirect taxes heading:

29
Source:-(Public Finance Statistics ,Ministry of Finance, 2013-14)

Interpretations:-

The Largest amount of Indirect Tax is generated from sales tax i.e. 37 % , Service tax constitute upto
13% , union excise duties 15 %, Customs 14 %, State Excise duties 7 %, Stamp and registration 7
%, taxes and vehicle 3 % and remaining all others 4%.
Cost incurred by government on collection of tax in the year 2013-14 (In Rs Crore).

30
Source:-(Public Finance Statistics ,Ministry of Finance, 2013-14)

Interpretations:-

From the above graph, It is seen that government is expending huge expenses on collection of Taxes
and the amount of expenses made on collection are increasing year on year.

Tax revenue as compared with Non Tax Revenue

Source:-(Public Finance Statistics ,Ministry of Finance, 2013-14)

31
Interpretations:-

From the above graph it is seen that the share of tax revenue in total revenue is 5 to 6 time more than
the Non tax Revenue.

FINDINGS

1) There is a vast number of taxes in India and different collecting authorities causing multiplicity
of taxes in India.
2) There is a huge dependence on indirect taxes for revenue generation. The amount
collected from indirect taxes is nearly twice the amount collected from direct taxes.
3) Both direct taxes and Indirect taxes have their own advantages and disadvantages.
4) Under direct taxes, the major components of taxes are corporation tax and taxes on income.
5) Under indirect taxes, the major components are customs, excise duty and service taxes.
6) The amount expended on collection of taxes is increasing year on year.

SUGGESTIONS

1) Government should focus more on structural reforms than policy reforms.

2) GST should be implemented soon to reduce the number of indirect taxes and facilitate ease of
doing business in India.
3) There should be effective implementation of Anti Tax evasion Bill.
4) Innovative Tax Systems like Banking Transaction Tax system Suggested by
ArthakrantiPratishthan Should be givens Serious thought upon as they can be future alternatives.
5) Administrative expenses incurred on Tax Collection needs to be brought down by making
reduction in the number of taxes and tax collection authorities.

32
CHAPTER-VI

CONCLUSION

33
 CONCULSION

Several critics of the tax reform programme in India have tended to judge the success or failure of the
programme in terms of increases in revenue that the reform has brought about. Adequacy of increase
is measured in terms of revenue to GDP ratio. To be sure, one of the objectives of tax reform is to
improve revenue elasticity and the tax ratio. However, it should be remembered that the impact of the
reform on revenue increase will not be immediate; tax compliance will increase with reduction in
rates only gradually. Similarly, improvements in tax enforcement will take time. It has been
emphasised in the Report of the Tax Reforms Committee that mere reduction in rates would not lead
to an increase in compliance and that stricter enforcement, which becomes easier with rate reduction,
is a necessary complementary step. Secondly, the growth in revenue is not to be measured only by
the tax ratio. A major objective of the tax reform is to facilitate and promote faster growth of the
economy. What is needed is not an immediate increase in the tax ratio but a faster growth in revenue
arising from a higher growth rate of the economy. With an elasticity greater than one, in course of
time, the tax ratio will rise. It could be said with some confidence that the tax system has been
reformed in India significantly enough to facilitate a higher rate of growth.

It must be admitted, however, that the structural reform is far from complete, although quite a bit of
ground has been covered in a short period of three years. Again, there has been only slow progress in
the reform of the tax administration. Tax policy makers and tax administrators will have their hands
full in the coming years.

34
 CHAPTER-VII

MANAGERIAL IMPLICATION

35
MANAGERIAL IMPLICATION

The objective of this paper is to show the importance of incorporating managerial capacity into the
empirical analysis of the determinants of donations to charitable organizations. We adopt a
production function approach to model the outcome of the fundraising process. The empirical
findings suggest that managerial capacity is an important factor determining charitable donations.
This finding is qualitatively robust using a variety of different estimation strategies including Olley
and Pakes style estimators, dynamic panel data estimators, standard IV estimators, and fixed
effects estimators. In contrast, estimates of the two other input factors, fund-raising expenditures
and government grants, are sensitive with respect to different identification strategies, sample
selection rules, and missing data imputation mechanisms

36
 CHAPTER-VIII

LIMITATION AND FUTURE SCOPE

37
This report is very limited and was inhibited in reaching its true potential because of the deadline
of this project, and mostly because of COVID-19, as discussed the entire internship of mine was
done in mixed from but more over it was donein front of a computer as a work from home (WFH)
internship, the lack of practical exposure from working with the company has affected the
gathering of information and even exaggerated because of the company being unhelpful with
preparing this report, it’s prepared in no Part with the collaboration with AGRAWAL & DORA (
CA FIRM ). Here are all the factors that might prevent usage of this report for any scientific
research:

Limitations

As we had less time for preparing the report for the topic study for Indian tax structure so my study
is based on secondary data, this is the primary limitation of my study and it is between 2009-10 to
2013-14, with a proper analysis of that years.

1. High Rate and Low Yield of Direct Taxes:

In India, as in other LDCs, the rate of direct tax is very high but the contribution to the total
tax rev-enue is very low. In the 1950s, the rate of income tax in India was one of the highest
in the world but the rev-enue was very insignificant. This is because high tax rates
encouraged tax evasion and avoidance on a large scale. It may be noted in this context that tax
avoidance refers to arranging one’s finan­cial affairs within the law so as to minimise
taxa-tion liabilities, as opposed to tax-evasion which is failing to meet actual tax liabilities
through, e.g., not declaring income or profit. So the Government gradually reduced the tax
rate over the years. In spite of this, the rate of income tax in India is one of the highest in the
world even today. The higher tax rate (including surcharge) at present is 30% (plus surcharge
of 2%).

2. Low Contribution of Income Tax:

38
 Although the rate of income tax is the highest in India, the contribution from such is very low.
Tax evasion seems to be the primary reason. Another reason is the high exemption limit in a
country where per capita income is very low. In India, the exemption limit has been raised
from time to time, but the levels of national and per capita incomes have failed to increase
proportionately. Consequently, more and more people have managed to come out of the tax
net. India’s per capita income in 1999-2000 was Rs. 16,047 at current prices but the
exemption limit in case of personal income tax was Rs. 50,000. If other deductions are
brought into consideration (such as investment in approved Government securities such as
NSCs, units of UTI, of public provident fund, or insurance policies), the exemption limit
would be even more. It is a pity that the percentage of people paying income tax in India at
present is less than one. Naturally, the major reliance is on indirect taxes. In fact, an undue
reliance on indirect taxes is a common feature of the system of LDCs.

3. Double Taxation of Dividends:

Moreover, due to double taxation of dividend, the rate of domestic saving and capital
formation has failed to increase appreciably. Companies pay corporation and other taxes
(such as excess profit tax or surtax) to the Government. A portion of net profit after tax is
usually distributed among shareholders in the form of dividend. A portion of such dividend
income is again taxed away in the form of personal income tax. Consequently, those who pay
tax on dividend income cannot save much and companies find it increasingly difficult to raise
financial resources on a large scale. It is often alleged that one of the cause of industrial
stagnation in India has been the high rate of taxation and slow growth of corporate capital.
The problem has assumed serious proportions in recent years.

4. Absence of Agricultural Income Tax:

Another feature of India’s tax system is that there is no tax on agricultural income.
Agriculture is the dominant sector of the Indian economy. The contribution of agriculture and
related activities to India’s GDP was 29.3% in 1999-00. Planned investment on agriculture
has also increased over the years. But agriculture has failed to make any contribution to the
introduction of the Government’s tax revenue. Since agriculture is a State subject, the
introduction of the agricultural income tax system at the Central level has not been possible.
This is another reason for undue reliance on indirect taxes.

5. Importance of Indirect Taxes:

39
 In India, importance of indirect taxes has increased over the years which implies that the
importance of direct taxes has diminished. In absolute terms (i.e., in terms of rupee) the
contribution of direct taxes has increased but the percentage contribution of such taxes in total
tax revenue has declined as Table 5.1 shows.

It is observed that tax revenue as a percentage of GDP has increased from 9 in 1960-61 to 15
in 2001-02. During the same period, the percentage contribution of direct taxes has declined
and that of indirect taxes increased. However, with the introduction of tax reforms in recent
years, the ratio of indirect to direct taxes has come to about 27.6:72.4 in 2001-02. This is the
most significant change that has occurred in India’s tax structure in the whole plan period. It
seems that substantial reliance on indirect taxes is unavoidable in our country in the
foreseeable future.

6. Progressive Taxes on Income:

The Government has made the system of direct tax progressive and progressiveness is
considered desirable in the interest of equity and for reducing the disparities in the
distribution of income and wealth. But progressive taxes encouraged tax evasion and
avoidance and have failed to reduce inequalities of income and wealth.

40
7. Widening the Indirect of Tax Net:

Over the years, the indirect tax net has been spread wide. Almost all the commodities that we
buy bear high indirect taxes as sales tax, excise duty, customs duty, octroi, cess and so on. At
present, Central Government revenue from two main taxes, viz., union excise duties and
customs accounts for about 80% of the total revenue. The collection from these two taxes
amounted to Rs. 81,720 crores and Rs. 54,822 crores, respectively, in 2001-02. However, the
major defect of the present system of indirect taxes is the cascading effect (i.e., the
cumulative burden) of such taxes. In India we find a multiplicity of levies. The same
commodity or factor of production (such as raw material or purchased component) is taxed
more than once as it passes through different stages of production and distribution. There is
tax such as State sales tax on an item on which union excise duties has already been paid.
There is, for instance, not only excise duty or sales tax on finished cars but also on tyres,
tubes and other components. Due to the multiplicity of levies the cascading effect cannot be
avoided. Thus, indirect taxes have caused cost-push inflation in India.

8. Regressive Nature:

Moreover, indirect taxes have become more and more regressive over the years. Such taxes
are usually imposed on consumption goods. In general, poor people have a high propensity to
consume than the rich people. In fact, the marginal propensity to consume gradually decreases
with an increase in income. Thus poor people, who spend the major portion of their small
income on consumption goods, pay the maximum amount of indirect taxes. Thus, over the
years, the direct tax system has become less and less progressive due to gradual reduction in
the personal income tax rate, while indirect taxes have become more and more regressive due
to the inclusion of more and more items in the excise net. A simple example will classify the
point.

Future research.

41
 Service tax is envisaged as the tax of the future. Well synchronized taxation on manufacturing, trade
(domestic & international) and service without giving rise to cascading effect of taxation would be an
ideal worth pursuing in the immediate future. This would bring in VAT in its truest sense, though the
ultimate objection usher in the regime of Goods and Service Tax (GST).
Continued growth in GDP accompanied by higher rate of growth in service sector promises
new & wider avenues of taxation to the Government. If the tax on services reduces the degree of
intensity of taxation on manufacturing and trade without forcing the Government to compromise on
the revenue needs, then one of the basic objectives of taxing the service sector would be achieved.
Advanced economies of Western Europe, North America and Far East have share of
service sector in their GDP ranging from 60% to 80%. The growth in absolute quantum ofGDP and
proportion of Service-sector in GDP holds promise for larger revenue generation without increasing
the existing level of taxation

Future Course of Action

The following items of works have to be attended to urgently to improve the administration of
Service Tax in the country.

1. Service Tax collection Target (Budget estimate) of Rs.180141 crores for

F.Y. 2013-14 to be exceeded.

2. Intensify the field survey operations to ensure that all taxable service
assessees are brought into the tax net and Service Tax due from them are
collected without hitch.

3. Recalcitrant/ habitual evaders of Service Tax have to be booked for

appropriate action under the law. There could be no leniency in this
regard.

4. Effective use of Audit and Anti-evasion as tools for ensuring the

compliance on the part of the assessee and curbing the instances of
irregularities and tax evasion. With the launch of ACES greater emphasis
will be on training the staff in computer skills necessary to carry out
effective, systematic and result oriented analysis of data available in the
system to achieve greater result.

42
5. Effectively implement an Electronic Tax Administration (ETA) system
for service tax so that service tax could be administered as a pioneer e-tax
of the country. The Directorate General of Systems & Data Management
has developed a web based software named as 'AUTOMATION OF
CENTRAL EXCISE AND SERVICE TAX' (ACES) which automates
various processes of Central Excise & Service Tax for Assesses and
Department and gives complete end to end solution. This web based
software is available at 'www.aces.gov.in'

6. Concentrate on liquidation of Service Tax arrears and issue necessary

clarifications to the field officers so that arrears linked up with disputed
interpretations of the provisions of the law could be easily resolved.

7. Attend to all major court cases relating to Service Tax law for early
decision.

8. Deploy adequate staff to attend to the service tax work and provide
infrastructure and conveyance to implement service tax law effectively

43
 CHAPTER-IX

REFERENCES / BIBLIOGRAPHY

44
1) https://www.researchgate.net/publication/301477841_INDIAN_TAX_STRUCTURE-
_AN_ANALYTICAL_PERSPECTIVE

2) https://www.britannica.com/topic/tax-law#ref71934

3) https://www.cbic.gov.in/htdocs-servicetax/ovw/ovw8_futuregrowth

4) https://www.economicsdiscussion.net/taxes/defects/8-major-defects-in-the-tax-structure-
of-india/12917

5) http://press-
files.anu.edu.au/downloads/press/p34191/mobile/ch01s05.html#:~:text=A%20major%20o
bjective%20of%20the,faster%20growth%20of%20the%20economy.&text=With%20an%
20elasticity%20greater%20than,a%20higher%20rate%20of%20growth

6) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3458210

45
APPENDICES

46
 Weekly Progress Report (WPR)

Amity Business School

NAME PRIYA NAYAK

ENROLLMENT NUMBER A80304619008

ORGANIZATION AGRAWAL & DORA FIRM

TYPE ONLINE & OFFLINE BOTH

ORGANIZATION GUIDE CA MANISH AGRAWAL

INTERNAL GUIDE Dr. Tanushree Gupta

INTERSHIP DURATION 1 Month (4 Weeks)

47
 Weekly Progress Report

AMITY BUSINESS SCHOOL

Week Number: 4

Week Date External Task Handled Learning’s External Internal

Supervisor Supervisor Guide
Feedback Feedback
Name

1 13 CA MANISH Gst & Taxation. old and new satisfied with Priya is
June AGRAWAL style of tax her work & doing well in
deduction appreciate- her work. She
according to able. got an
opportunity to
there fixed tax
learn the
rate , different
comparison of aspects of
new & old style GST and
of tax Taxation
deduction, tax which helps
deduction from her to gain
capital practical
income/losses, knowledge.
deduction or She contantly
application of in touch with
regarding her
Gst in business.
work
2 20 CA MANISH Taxation & Ms Tax deduction in Work done She is
June AGRAWAL Excel. salaries & other by her was working on
sources, what very well. GST and
are other Taxation
sources, which is very
calculation in ms good for her
excel, data
practical
transfer from
one sheet to knowledge.
another,use of She is doing
logical formula. well .
3 27 CA MANISH Taxation & Ms tax deduction in she is really Currently
June AGRAWAL Excel. house property, working Priya is
what are house hard, her working on
property, set-off work is Tally which is
of gains & losses impressive a good source
in capital and I am of practical

48
 gain/losses, quite happy knowledge.
depreciation, with her And she also
creating performance. learning
company, practical
creating leagers. aspects of
Taxation.
4 4 CA MANISH Taxation , Tally & percent I must say She has
July AGRAWAL Ms Excel. calculation, priya is a worked on
auto sum, hard excel and on
average working & tally
punctual regarding
calculation,
girl, she taxation. She
find & replace.
compeleted has performed
entry in her work well and
purchase, sales, very well & received good
payment, her efforts feedback.
receipt, were seen to
journal & entry me clearly. I
of discount. appreciate
TDS , clubing her for her
& deemed. harding
work and
contribution.

Signature of Student
Seal & Signature of Company Guide Remarks from the Company Guide:

49
 ALL RIGHTS RESERVED

AMITY BUSINESS SCHOOL

AMITY UNIVERSITY, CHHATTISGARH, INDIA

50