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Indirect Tax

Chidambaram

Illustration: Binay Sinha

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	An indirect tax is one that is not paid directly by a person to the government but collected by an intermediary and passed on to the government. Indirect taxes are imposed on goods and services on the basis of production, supply, sale or purchase of products or provision of services, in the form of goods and services tax (GST).</div>
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	GST, rolled out in 2017, replaced various indirect tax laws that previously existed in India, such as import and export duty, excise, sales tax, value-added tax (VAT), service tax, entertainment tax, electricity duty, tax on passenger fares, freights etc.</div>
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	<strong>How are indirect taxes collected?</strong></div>
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	An indirect tax is collected from the consumer by an intermediary, such as manufacturer, trader or service provider. The intermediary files a tax return and forwards the tax proceeds to the government with the tax return. The consumer bears the final economic burden of the tax by paying more for the product.</div>
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	By comparison, direct taxes are imposed on persons and collected by the government directly from those on whom they are imposed.</div>
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	In indirect taxation, the obligation of tax payment varies from one consumer to another, as these taxes are levied by the government on goods and services &mdash; not on the income, profit or revenue of an individual. These taxes can be shifted from one taxpayer to another. This is unlike direct taxes, which are borne by the person on whom the tax is levied.</div>
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	<strong>What is GST?</strong></div>
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	GST was rolled out on July 1, 2017, as India&rsquo;s most comprehensive indirect tax reform. It consolidated multiple indirect tax that existed previously into a single one. The implementation of GST aimed to make the indirect tax system more unified across the many states of the country. Read more... (https://www.business-standard.com/about/what-is-goods-and-services-tax)&nbsp;</div>

Learn what is Indirect tax, Indirect tax Calculation, Definition and more Indirect tax news here at Business Standard.

What is Indirect tax, Indirect tax News, Budget 2020 News, Indirect tax Calculation

What is Indirect Tax

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	The Goods and Services Tax (GST) is a uniform indirect tax levied on goods and services across the country. GST, as an umbrella tax, replaced central taxes like central excise, service tax, additional duties of excise &amp; customs, special additional duty of customs, besides cesses and surcharges, on supply of goods and services.</div>
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	<strong>Central GST and State GST</strong></div>
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	CGST is levied on intrastate supplies by the central government and SGST is levied on intrastate supplies by respective state governments.&nbsp;</div>
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	<strong>Integrated GST</strong></div>
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	IGST is levied on interstate supplies by the Centre (equal to CGST + SGST combined on supplies made within the state).</div>
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	Any supply of goods or services or both on interstate basis typically attracts IGST on the consideration thereof.</div>
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	<strong>Key features of GST</strong></div>
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	* GST envisages all transactions and processes to be done only through the electronic mode, to achieve a non-intrusive administration. This minimises the taxpayer&#39;s physical interaction with tax officials.</div>
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	* GST provides for the facility of auto-populated monthly returns and annual return.</div>
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	* It also facilitates taxpayers by prescribing grant of refund within 60 days, and provisional release of 90 per cent refund to exporters within 7 days.</div>
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	* Further facilitation measures include interest payment if refund is not sanctioned in time, and refund to be directly credited to bank accounts.</div>
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	* Comprehensive transitional provisions for ensuring smooth transition of existing taxpayers to GST regime, credit for available stocks, etc.</div>
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	* Other provisions include system of GST compliance rating, etc.</div>
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	* Anti-profiteering provisions for protection of consumer rights: Any benefit by way of reduction in rate of tax or increase in input tax credit arising due to introduction of GST are passed on to customers (through reduction in sale price) by way of commensurate reduction in prices.&nbsp;</div>
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	* Under the GST regime, exports are zero-rated in entirety, unlike the earlier system where refund of some of the taxes did not take place due to fragmented nature of indirect taxes between the Centre and states.</div>
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	* GST is largely technology-driven and reduces the human interface to a great extent</div>
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	* GST is believed to have improved ease of doing business in India.</div>
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GST envisages all transactions and processes to be done only through the electronic mode, to achieve a non-intrusive administration. This minimises the taxpayer's physical interaction with tax officials

Things to know about Goods and Services Tax

Goods and Services Tax

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	Income tax is a direct tax that a government levies on the income of its citizens. The Income Tax Act, 1961, mandates that the central government collect this tax. The government can change the income slabs and tax rates every year in its Union Budget.&nbsp;</div>
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	Income does not only mean money earned in the form of salary. It also includes income from house property, profits from business, gains from profession (such as bonus), capital gains income, and &#39;income from other sources&#39;. The government also often provides certain leeway such that various deductions are made from an individual&#39;s income before the tax to be levied is calculated.&nbsp;</div>
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	<strong>Income Tax Returns</strong></div>
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	Income Tax Returns (ITR) form are the basis of calculating a person&#39;s income tax. It is a statement showing the status of a person, all their sources of revenue, deductions and, lastly, the tax payable or tax refund, if any.&nbsp;</div>
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	<strong>Income Tax slabs</strong></div>
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	What income tax rate a person pays depends on the slab they fall in. The government has categorised incomes into slabs like &mdash; up to Rs 250,000, Rs 250,000-Rs 5,00,000, Rs 5,00,000-Rs 1 million, and more than Rs 1 million. The rates on different slabs might be different based on age groups.</div>
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	<strong>Standard deduction</strong></div>
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	Tax on some components of income can be waived by the government. These tax reliefs are known as standard deductions.</div>

Income does not only mean money earned in the form of salary. It also includes income from house property, profits from business, gains from profession (such as bonus), capital gains income, and 'income from other sources'

Things to know about Income Tax

Income tax

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	Through Direct Taxes Code (DTC), the government aims to simplify the structure of direct tax laws in India into a single legislation. The DTC will replace the Income-tax Act, 1961, and other direct tax legislation like the Wealth Tax Act, 1957.</div>
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	<strong>DTC from 2009 to 2014</strong></div>
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	The first draft Direct Taxes Code Bill was released on August 12, 2009, and then a Revised Discussion Paper (RDP) was in 2010.</div>
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	DTC 2010 was introduced in Parliament and the government formed a Standing Committee of Finance (SCF) to discuss it with various stakeholders. The SCF submitted its report to Parliament in 2012. The government took into account the recommendations of the SCF and a &#39;revised&#39; version of DTC was released in 2014. However, it lapsed when the NDA government came to power that year.</div>
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	<strong>Direct Taxes Code from 2017 to 2019</strong></div>
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	In 2017, Prime Minister Narendra Modi-led government set up an expert committee to draft a new Direct Taxes Code. The report of the task force on DTC was submitted to Finance Minister Nirmala Sitharaman on August 19, 2019. It is yet to be made public. Akhilesh Ranjan, a CBDT member, is the head of the task force. The other members of the task force are Girish Ahuja (chartered accountant), Rajiv Memani (chairman and regional managing partner of EY India), Mukesh Patel (Practising Tax Advocate), Mansi Kedia (Consultant, ICRIER) and G C Srivastava (retired IRS and Advocate).</div>
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	<strong>Direct Taxes Code 2.0</strong></div>
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	According to a <a href="https://www.business-standard.com/article/economy-policy/direct-tax-code-2-0-task-force-for-big-relief-to-individual-taxpayers-119082000023_1.html" target="_blank">Business Standard report</a>, the expert panel has recommended a significant increase in the highest income-tax slab, besides slashing the corporation tax rate to an even 25 per cent for both domestic and foreign companies. Income taxpayers earning up to Rs 55 lakh a year might end up with a major tax relief if the panel&rsquo;s recommendation to change the tax bracket and rebates is accepted.</div>
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	<strong>Key points of Direct Taxes Code 2.0</strong></div>
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	&mdash; Those earning up to Rs 55 lakh may get major tax relief</div>
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	&mdash; Foreign firms may have to pay branch profit tax</div>
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	&mdash; Dividend distribution tax may be done away with</div>
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	&mdash; A slew of incentives for start-ups</div>
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	&mdash; Assessing units to replace assessment officers</div>
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	&mdash; Mechanism of mediation between taxpayers and CBDT</div>
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	&mdash; Proposed DTC to have far fewer sections than over 700 in the Income Tax Act&nbsp;</div>

Learn what is Direct Taxes Code, what is Direct Tax Code 2.0, Taskforce on Direct Tax Code news, Direct Tax Laws, Income tax Surcharges at Business Standard.

What is Direct Taxes Code | Direct Tax Code 2.0 News | Direct Tax Laws

Direct Taxes Code

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	Corporation tax is a direct tax imposed on the net income or profit that enterprises make from their businesses. Companies, both public and privately registered in India under the Companies Act 1956, are liable to pay corporation tax. This tax is levied at a specific rate according to the provisions of the Income Tax Act, 1961.</div>
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	In a major move, Finance Minister Nirmala Sitharaman in September 2019 announced sharp cuts in the corporation tax among a series of announcements. The government decided to slash domestic corporate tax to an effective 25.17 per cent, inclusive of all surcharges and cess, in a bid to promote growth and investments amid an economic slowdown. The move would cost the exchequer Rs 1.45 trillion.</div>
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	The government proposed to reduce the corporate tax rate from the existing 30-25 per cent (depending on the turnover thresholds) to 22 per cent (effective rate 25.17 per cent, including surcharge and cess) for all the domestic companies, subject to them not availing of a specified list of exemptions. These include, among others, exemptions available to units in special economic zones, deductions for certain scientific research expenditure, additional depreciation available on fresh investments and the losses, if any, attributable to such deductions.</div>
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	The minimum alternate tax (MAT), introduced to facilitate the taxation of zero-tax companies, will also not be applicable to companies availing of the reduced rate of taxation.</div>
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	Companies claiming exemptions could continue to avail of them and pay taxes at pre-amended rates, that is, 25-30 per cent. They might opt to pay taxes at lower rates at a future date. However, the option to pay taxes at the reduced rate of 22 per cent, once selected could not be changed. Significantly, where the companies continue to avail of exemptions, the MAT rate has been reduced from 18.5 per cent to 15 per cent.</div>
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	Any new domestic manufacturing company, incorporated on or after October 1, 2019, is to be allowed to pay corporation tax at the rate of 15% (effective rate 17.01%). No MAT is to be imposed on these companies either.</div>
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	Enhanced surcharge will not apply to capital gains on sale of any securities, including derivatives, in the hands of Foreign Portfolio Investors (FPIs).</div>
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	The finance minister also announced an expansion in the scope of corporate-social responsibility (CSR) activities. The companies can now spend 2% of the money on state or Union govt incubators, PSUs, state universities, IITs, public-funded entities.</div>

What is Corporate Tax: Get latest news on Corporation Tax, corporate tax rate, corporate tax cuts, corporate tax in India, corporate income tax on Business Standard.

Page 4 - Latest Updates on Indirect Tax

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Indirect tax mop-up rises 33% in May

Indirect tax collections jump 42% in April

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