Government of India has made the following changes in indirect tax rates, effective from 19th October, 2015:
- In view of the continued fall in international prices of wheat and the anticipated adverse impact of increased imports during the first half of this financial year, basic customs duty on wheat has been increased from 10% to 25% for a period upto 31.03.2016.
- Specified biodiesel is exempt from central excise duty. However, its inputs namely, RBD Palm Stearin, Methanol and Sodium Methoxide are chargeable to central excise duty leading to CENVAT credit accumulation.
- Central excise duty has been exempted on RBD Palm Stearin, Methanol and Sodium Methoxide used in the manufacture of such biodiesel subject to actual user condition for a period upto 31.03.2016.
TAX SYSTEM IN INDIA
Taxes represent the amount of money we pay to the Government at predefined rates and periodicity. Taxes are the basic source of revenue to the Government using which it provides various kinds of services to the tax payers.
There are mainly two types of Taxes, direct tax and indirect tax which are governed by two different boards, Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC).
Direct taxes are the personal liability of tax payer. These are collected directly from the tax payers and they have to be paid by the persons on whom it is imposed. Important direct taxes are listed below:
This is most important type of direct tax and almost everyone is familiar with it. TDS is its famous synonym and whosoever is earning above a minimum amount (tax exemption limit) has to pay income tax.
This is in addition to the income tax and is levied if your net wealth exceeds Rs 30 Lakh at the rate of 1% on the amount exceeding Rs 30 Lakh.
Property Tax/Capital Gains Tax
This is levied on the capital gains arrived by selling property and stocks. Tax rates are different for long term and short term capital gains.
Gift Tax/ Inheritance or Estate Tax
Amount exceeding Rs. 50000 received without consideration by an individual/HUF from any person is subjected to gift tax as income under “other sources”. There are exemptions like money received from relatives is not taxable. Marriage gifts and money received through inheritance are also exempt from gift tax. Inheritance tax was earlier in practice but has been repealed by the government.
Companies operating in India are taxed as per the corporate tax rate on their income. This tax is one of the major sources of revenue for government.
Impact and incidence of indirect Taxes fall on different persons as opposed to direct taxes where impact and incidence is on the same person. These taxes are recovered from different groups of people but the liability remains with the person who collects it. Tax payer recovers the indirect taxes paid from their consumers and clients and finally pays it to government.
For example, when we purchase any product we pay VAT, when we eat in restaurants we pay service tax which are ultimately deposited in government’s kitty by the service providers. Brief about various types of indirect taxes is given below:
Service providers in India are subject to service tax, which is charged on the aggregate amount received by the service provider. Services like leasing, internet/voice, transport, etc are subject to service tax.
Custom duties are indirect taxes which are levied on goods imported to/exported from India. There are different rules for different types of goods and sectors. Government keeps on changing these rates so as to promote import/export of specific goods.
Excise duties are indirect taxes which are levied on goods manufactured in India for domestic consumption. Like custom duty, there are a number of rules which keep on changing as per government discretion.
Sales Tax and VAT
Sales tax is levied by the government on sale and purchase of products in Indian market. As customers, whatever you buy from the market, you pay sales tax on it. Now, sales tax is supplemented with new Value Added Tax so as to make it uniform across country.
Security Transaction Tax (STT)
STT is levied on transactions (sale/purchase) done through the stock exchanges. STT is applicable on purchase or sale of various financial products like stocks, derivatives, mutual funds etc.