Today let’s Discuss Important IBPS Topic Indian Tax System [Part 1]
A mandatory levy paid by an economic unit (incidence*) to the Government is called tax.
Impact: The person or company who have the first obligation to pay the taxes. Example- Excise Duty charged on production units, Octroi collected in check posts etc.
Incidence: The final unit which bears the responsibility to pay tax to the government. Example- Though Excise duty is charged to the investor Mr. A (producer) but ultimately the consumer (common people) pays for it. Hence the ‘impact’ is on Mr. A but ‘Incidence’ on common people.
Tax Base: The reference object to which the tax is payable. Ex- Base of Income tax is the person’s income.
Detailed Version of Important IBPS Topic Indian Tax System
Types of Taxes
- Direct Taxes: Impact and Incidence is imposed on same person.
- Fringe Benefit Tax : Benefit to the employer like entertainment, picnic, company tours, etc. However this tax was abolished in 2010.
- Wealth Tax: Tax imposed on the wealth of any person.
- Corporate Income Tax: Tax on profit of any corporate.
- Securities Transaction Tax (STT): Tax on transaction of securities i.e. shares, bonds etc.
- Minimum Alternative Tax: Total savings of any company stands below 30% of book (estimated) profit then MAT is imposed on total income.
- Indirect Tax: Impact and Incidence are imposed on two different points.
- Service Tax: Tax imposed on services of Companies and individuals.
- Excise Duty: Imposed on quantity of production units.
- Customs Duty: Tax imposed on Export and Import of commodities (only goods not services).
- VAT: Tax imposed on value addition on every stage of production. It is imposed by state governments.
- Modified VAT: It’s a type of excise duty.
- Octroi: Tax imposed on entry of goods on every check posts while entering into a local area.
- GST: The GST will insert a new article which will give state and Union government the concurrent power to make laws on taxation of goods and services. Hence GST will be collected at two levels, i.e. Centre and the states. Its basic feature will be same as VAT.
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