Indian Taxation System

Direct taxes are paid directly to the government by the taxpayer, like income tax, corporation tax, and estate tax. Sales tax is an indirect tax because it is collected by intermediaries (retailers) from consumers and then passed to the government - the burden can be shifted. Estate tax, corporation tax, and wealth tax are direct taxes.

 Ad valorem is a tax on price.

Former Finance Minister Pranab Mukherjee unveiled a three-year plan for moving to a single-rate goods and services tax (GST) regime of 16 per cent for the Centre as well as the states. He suggested, the Centre to adopt a three-rate formula. While Mukherjee proposed that the rate of taxation for services be fixed at 8 per cent, a dual-rate regime for goods was recommended at the meeting of the empowered committee of state finance ministers. The Centre plans to keep a lower rate of 6 per cent for certain goods and maintain a standard rate of 10 per cent in the first year. In case the states agree to the formula, the standard GST rate had been 20 per cent since the states and the Centre will levy 10 per cent each on goods. For products which attracted a lower rate, the total GST burden had been 12 per cent, assuming that the Centre and the states agreed to levy 6 per cent each on these products.

Correct Answer: II and III only

One of the major recommendations given by Kelkar Task Force (KTF) was the implementation of a single union GST. It was contradictory to the recommendations given by most of the scholars and those given by the Joint Working Group.

Income Tax was introduced for the first time in 1858. Lord Canning’s régime was from 1856 to 1862.

Some highlights of the Direct Taxes Code Bill are as follows:  Corporate Tax will remain at 30 percent, but without surcharge and cess. MAT will be 20 percent of book profit, up from 18.5 percent. Once enacted, the DTC will replace the archaic Income Tax Act, 1961. However, many provisions of the Income Tax Act will be a part of DTC as well. Hence, statement 3 is wrong. 

India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. Central Government levies taxes on income (except tax on agricultural income, which the State Government can levy), customs duties, central excise and service tax. Value Added Tax (VAT), stamp duty, state excise, land revenue and profession tax are levied by the State Governments.

Statement 1 is correct. Statement 2 is wrong: Generally, the Government of India earns the maximum from Union Excise Duty.

The Income Tax Act of 1961 imposes tax on income under the following five heads:

All of the given statements are perfectly correct. A student may get confused in statement 3, but the proposed DTC carries the provision for fringe benefit tax to be charged on the employee rather than the employer.

Statement 1 is wrong: Please note that Excise duty is not a tax on sale of goods but it is a tax on manufacture or production of goods for sale (in India). Rest of the three statements are perfectly correct. 

While customs duties include both import and export duties, but as export duties contribute only nominal revenue, due to emphasis on raising competitiveness of exports, import duties alone constitute major part of the revenue from customs duties. As per Section 12 of the India Customs Act, customs duty is imposed on goods belonging to Government as well as goods not belonging to Government.

Service tax is a part of Central Excise in India.

The Central Board of Direct Taxes (CBDT) is a part of the Department of Revenue in the Ministry of Finance, Government of India. It is India's official FATF unit. The purpose of the FATF is to develop policies to combat money laundering and terrorism financing.