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The main aim of the ruler was to get as much money as possible.tax evasion occurred to a great extent.after independence every attempts was made to make the tax system equitable - economical,just and production.
The main aim of the ruler was to get as much money as possible.tax evasion occurred to a great extent.after independence every attempts was made to make the tax system equitable - economical,just and production.
The main aim of the ruler was to get as much money as possible.tax evasion occurred to a great extent.after independence every attempts was made to make the tax system equitable - economical,just and production.
In India central governments and local bodies collect about 25 lakhs crores from various taxes. Before the study of indian tax system we should know about the term 'Tax' and it's features ~ Owing to certain historical reasons during British rule our tax system continued for long to be in unorganised -unregulated and unplanned .No attention was paid for the uniformity in the tax system. there existed a vast different between the tax polices in uniformity in the state and provinces .
INDIAN TAX SYSTEM The main aim of the ruler was to get as much money as possible and hence no principle of taxation of considered .There was nothing like the elements of equity certainty and economy is the tax system .Tax evasion occurred to a great extent .The tax system was mainly regressive and its main aim was to finance the administration .The aims of social welfare -social justice and economics growth are only of post independence origin in India .After independence every aspect of the tax system was properly studied and every attempts was made to make the tax system equitable - economical just and production .
Merits And Demerits of Indian Tax system
Indian tax system is base of Indian public revenue comes through various taxes . The merits and demerits of Indian tax system are as under-- #Merits of Indian tax system : In general Indian tax system is a good system of taxation system .The merits of Indian tax system are as following--
1.Based on equity : Indian tax system is based on the principle of equity .The government leives various taxes on various section of the Society considering their taxable capacity .Rich class may pay more taxes so the govt. of India imposes Income Tax wealth tax expenditure tax etc.on them while poor and lower middle class are exempt form such taxes. 2.Various types of taxes: The government of India state government and local bodies ( municipal corporation municipalty gram panchayats etc.)impose various type of taxes on production selling distribution of commodities and income wealth and properties of person .Excise duty customs duty income tax wealth tax service tax etc. are imposed by the central govt. While value added tax sale tax Land revenue entertainment tax professional tax stamp duty road tax are imposed by state . Octori property tax Entry tax etc.are main taxes which are levied by local bodies. 3.Elasticity : The feature of elasticity is found in the Indian tax system .Excise duty customs duty sales tax and income tax are such taxes from which the governments can collect required revenue from little alteration of tax rates or imposing surcharge . 4.Productive tax system : Indian tax system contains so taxes which are productive nature. Income from excise duty are increasing rapidly due to increase in production from quantity and price point of view . Revenue from Income tax increasing fast due to prosperity and higher income of the persons . The state governments earns more sales tax because turnover of the dealers is increasing day by day.
5.A good combination : Indian tax system is a good combination of direct and indirect taxes. Their is a clear division of source between central and provincial government The central govt. levies and collects some important direct taxes like income tax and wealth tax while Excise duty and customs duty are such indirect taxes which pays sufficient revenue to central government 2/3 parts of tax revenue comes through direct taxes while remaining 1/3 part comes through indirect taxes .It is good combination from developing country point of view .On the contrary the state governments mostly depends upon Indirect taxes -like VAT State Excise duty etc.
6.Follow up the maximum welfare theory : Indian tax system follows the principles of maximum welfare of society in respect of public finance . The government collect taxes from rich and higher income group and spends on poors and weaker section of the society .Heavy excise duty customs duty and sales tax are imposed on Luxury good and essential goods are exempt from tax or very low tax rates applied. 7.Rapidly reduction in tax rates : After liberalisation the government has reduce tax rate rapidly .specially rates of income Tax Excise duty and customs are reduced at handsome levels .Once upon a time maximum rates of income tax was 80% which is now 30% customs duty was levied at 200% to 500% which is now only 10% .
8.Simplification : A parts from reduction of rates the government of India has also simplified the tax Laws and procedure for assessment . Now assessment of income tax payers become more eaiser and quick . The different rates of excise duty has been abolished and a general rare applied .These steps have been proved convenient for tax payers. 9.Wide scope of taxation : Indian tax system has a wide scope of taxation .In this system mostly goods service and person covered under various types of taxes .Though the number of income tax payer is increasing rapidly but still it is lower in term of percentage .Only 5% of total population is covered under income tax.
Notax system in the entire globe can claim perfection but our tax's systems has more than the ordinary share of shortcoming or defect may be noted- 1. Traditional and Conservative : The Indian tax system is traditional and conservative so that taxes like land revenue and excise duties continue in spite almost universal criticism .Death duty gift tax wealth tax which serve a useful purpose by reducing inequalities of wealthhad not been introduced till recently. 2.Inefficient to check tax evasion : Our tax system is also inefficient to check tax evasion .There is large Scale evasion of taxes . * Demerits of Indian tax system
3.Narrow coverage : As the planning Commission has pointed out another unsatisfactor feature of the Indian tax structure as at present is that it affects only a narrow range of population to any appreciable extent .Direct taxes for example affect about 2% of the working force in the country .Similarly excise duties on cloth and Tobacco are paid by a limited number of consumers who use better varieties.
The percent level of the evasion of excise duty Sales tax and income tax is around 2lacs crores per year .It is about 25% of tax .This leads to the cutting down of much potential revenue . 4.High Rate of Taxation : Another criticism against the Indian taxation system is that the rates of the taxes are heavy . Sometimes the rate are so heavy that people cannot pay them. 5.Resources inadequate and Inelastic : Our resources are also inadequate and inelastic .The revenue of both the centre and the state are hopelessly small. According to the estimates of planning commission India 's total tax revenue formed about 11%of its national income a very low figure as compared to other relatively advance d countries . Thus the total tax revenue formed 35% of the national income in the U.K. 27% in Japan 23% in the USA and 22% in Australia .
6.Uncertainty: Indirect taxes are often rather uncertain. Taxes on commodities with elastic demand are particularly uncertain, since quantity demanded will greatly affect as prices go up due to the imposition of tax. In fact a higher rate of tax on a particular commodity may not bring in more revenue. 7.Inflationary: The indirect taxes are inflationary in nature. The tax charged on goods and services increase their prices. Therefore, to reduce inflationary pressure, the government may reduce the tax rates, especially, on essential items 8.Possibility of tax evasion: There is a possibility of evasion of indirect taxes as some customers may not pay indirect taxes with the support of sellers. For instance, individuals may purchase items without a bill, and therefore, may not pay Sales tax or VAT (Value Added Tax), or may obtain the services without a bill, and therefore, may evade the service tax.
CONCLUSION
Elaborate analysis of merits and demerits of direct and indirect taxes makes it clear that whereas the direct taxes are generally progressive, and the nature of most indirect taxes is regressive. The scope of raising revenue through direct taxation is however limited and there is no escape from indirect taxation in spite of attendant problems. There is common agreement amongst economists that direct &indirect taxes are complementary and therefore in any rational tax structure both types of taxes must find a place.