Basics of taxation

•Duty: Tax on goods(e.g) Excise duty.

• Tax: Tax on other than goods(e.g) Service tax.
• Indirect tax: Incidence of tax is on one person and impact of tax
is on another person. Tax is passed on Ex VAT, Excise duty.
Direct Tax: Incidence as well as impact fall on the same person.
Tax is not passed on. Ex Income tax
 Constitutional provisions
• Article 265 of the constitution of India: Tax is leviable through Acts only.
• Income tax- By Income Tax Act, 1961
• Central excise duty- By Central Excise Act,1944.
• Acts are made by:
• 1. The Union-Central Government(Parliament)
• 2. The States-state government(State assemblies).
• Article 246 of the constitution of India: Allocation of subjects between the
union and the states is made through the seventh schedule to the
constitution.
• There are three lists in the seventh schedule :
• List I (union list): Union subjects.
• List II (State list): State subjects.
• List III(Concurrent list): Subjects common to both the union and the states
 Allocation of Subjects
UNION LIST STATE LIST CONCURRE
NT LIST
Entry no Subject Entry no Subject Entry no Subject
82 Income 46 Income 17-A Forests
Tax(Non Tax(agricultu
agricultural ral Income)
Income)
84 Excise duty 51 Excise 17-B Wild
PETROL duty(Liquor) animals and
DIESAL birds
ETC(other
than liquor)
83 Customs ---------------- ----------------- ----------------- --------------
duty --
92-A Central sales 54 VAT (intra 25 Education
Tax(inter state sales)
state sales)
 Residual items
• Entry 97 of union list covers residual items.
That is items not covered by any list will fall
under this entry. There is no specific authority
for service tax and it is covered by Entry 97
 Constitutional 101 amendment 2016
on GST
• Art.246A. (1) Notwithstanding anything
contained in articles 246 and 254, Parliament,
and, subject to clause (2), the Legislature of every
State, have power to make laws with respect to
goods and services tax imposed by the Union or
by such State.
• (2) Parliament has exclusive power to make laws
with respect to goods and services tax where the
supply of goods, or of services, or both takes
place in the course of inter-State trade or
commerce.
 continued
• ‘‘269A. (1) Goods and services tax on supplies in the course of inter-State trade or commerce
shall be levied and collected by the Government of India and such tax shall be apportioned
between the Union and the States in the manner as may be provided by Parliament by law
on the recommendations of the Goods and Services Tax Council.
• Explanation.—For the purposes of this clause, supply of goods, or of services, or both in the
course of import into the territory of India shall be deemed to be supply of goods, or of
services, or both in the course of inter-State trade or commerce.
• (2) The amount apportioned to a State under clause (1) shall not form part of the
Consolidated Fund of India.
• (3) Where an amount collected as tax levied under clause (1) has been used for payment of
the tax levied by a State under article 246A, such amount shall not form part of the
Consolidated Fund of India.
• (4) Where an amount collected as tax levied by a State under article 246A has been used for
payment of the tax levied under clause (1), such amount shall not form part of the
Consolidated Fund of the State. (5) Parliament may, by law, formulate the principles for
determining the place of supply, and when a supply of goods, or of services, or both takes
place in the course of inter-State trade or commerce.’’
 Legislation and administration
• Taxes duties are levied by the legislature (called I estate).
• “BILL” is passed by the parliament and approved by the
president becomes ACT(Union Act)
• “BILL” is passed by the legislature and approved by the
governor becomes ACT(State Act)
• Acts are administered by the Executive government( called
II Estate).
• Customs Act: By customs department
• Income tax Act: By income tax department.
• Assessees aggrieved by the assessment orders passed by
the income tax officer, Superintendant s of customs and
excise, commercial tax officer can approach the courts for
redressal (Judiciary-Called the III Estate)
 Role of judiciary
• Judiciary can
• Uphold the assessment order(Acceptance)
• Annul the assessment order(Cancellation)
• Modify the assessment order(Partly approving
and partly disapproving)
• Quash the law if it is ultra vires the
constitution of India.
 Role of print and electronic media
• Press and media (Called the IV estate) go on
commenting on the action (right/wrong) and
inaction of the government.
• They can echo the peoples ’voice but can not
correct the government as judiciary does.
 Role of RTI Act
• Transparency in the activities government is
ensured through the Right to Information Act.
• Nothing is secret in government except
matters of secret and strategic and defence
matters.
 Role of CAG

• CAG(Comptroller of Auditor general of India)

conducts independent audit of all government
transactions and reports the violations to the
legislature, for enabling the I estate to
reprimand the II estate
 Parliamentary system of control and
management
• Democracy is
• the government of the people, by the people
and. for the people.
• In India, we rule ourselves through our elected
representatives of the parliament
 Checks and balances
• As may be seen from the above , our system
has adequate checks and balances. Any excess
by one wing is controlled by another wing.
• State of AP v.Raja • Land Revenue imposed
Reddy at flat rate on land
without taking into
productivity of the soil
and hence violative of
Art.14
• Mupil Nair v. State of • No procedure for
Kerala (AIR 1961 SC assessment and
552) collection of Tax is
violative of Art.14
 •
• Davidas v. state of The legislature would not confer to fix the
rate of tax to the government or to the
Punjab(AIR 1967 SC administrative authorities unless the
maximum rate of tax was fixed by the
legislature itself. The basis statutory
power confered by the statute cannot
transferred by the rule making authority.
The imposition of tax must be in the
prescribed by the law.Where the satute
provides that the subordinate can leavy an
imposition with sanction of specified
authority, an imposition made without
such sanction is invalid. Where statute
authorises imposition of fee for certain
services to rendered subordinate
legislation cannot provide for the
imposition of Tax unrelated to the service
in the name of fee.
• Avinder singh v. state of • There is nothing in
punjab (AIR 1979 SC Article 265 which
321) prohibit the legislature
to impose tax TWICE on
a thing.
• EI Tobacco Co. v. State • Sale Tax on virginia
of AP tobacco but not on
country tobacco was
upheld
• Western India Teatre v. • A higher tax on cinema
Condonment Board teatre containing large
seating accomdation
and situated
fashionable busy
locality where number
visitors are numerous
than small cinema
houses was upheld as
not violative of Art.14
• Indian Express v. Union of
india
• STATE OF KERALA v. THARA
JAYAKUMAR,
• Classification of news papers
into small, medium large was
upheld (Not violative of
Art.14)
• The Kerala High Court has
struck down as
unconstitutional the State
Government’s decision to levy
a ’Mangalya Nidi’ cess on
weddings and associated
celebrations from auditoriums
and hotels of three star
category and above.
•
 Indian Banks' Association, ... vs M/S Devkala
Consultancy Service & ... on 16 April, 2004

•• A taxing statute must be construed reasonably. Nothing can be realised

by way of tax or akin thereto which has not been authroised by the
Parliament.
• The Executive cannot levy tax. It, for the said purpose, therefore, cannot
even take recourse to the process of interpretation of a statute.
• When such an unjust enrichment takes place, the doctrine of de minimis,
in our view, should not be applied in equity or otherwise. We would
request the Comptroller and Auditor General of India to effect recoveries
of all the excess amount realised by the Union of India by way of interest
tax and interest by the banks and other financial institutions and create
the corpus of such fund therefrom. The appellant and other concerned
banks are also hereby directed to contribute to the extent of Rs. 50 lakhs
each in the said fund.
•
• The Comptroller and Auditor General of India
would be the Chairman of the said Trust and
the Finance Secretary and the Law Secretary
of the Union of India would be the ex- officio
members thereof. The corpus so created may
be invested in such a manner so as to enable
the trustees to apply the same for the purpose
of giving effect to the aforementioned
provisions of the 1995 Act.
• The Union of India, the Reserve Bank of India, the
appellant Banks, other scheduled banks and
financial institutions are directed to render all
cooperation and assistance to the trustees.
• The Committee as also the Committees set up by
the Central Government should act in close
cooperation with each other. The Committee may, if
it thinks proper, invest any amount in the Trust set
up by the Central Government under the 1999 Act
or any other scheme framed by the Central
Government, as noticed hereinbefore.
• The trustees aforementioned with a view to give effect
to this order may frame an appropriate scheme. In case
of any difficulty they may approach this Court for any
other or further order/orders or direction/directions.
• The Central Government, however, with a view to
implement the aforementioned provisions may by
amending the 1995 Act provide for creation of such a
fund and in such an event, the statutory authority, if
any, would be entitled to take over the corpus of the
fund but so long no legislative step is taken in this
behalf, this order shall remain in force.