The Study of India's Tax System Analytical

INTRODUCTION

The primary goal of India's tax system is to generate enough money to cover the government's costs for things like public services and administration. A taxation is a tool for lowering personal consumption and shifting funds to the state for massive infrastructure projects. It's also utilized to level economic playing fields by narrowing wage and wealth gaps.[1]

Article 246 of the Indian Constitution lays out how the various levels of government in the country share legislative authority. Within its three lists, India's Constitution lays out who is responsible for what in terms of the country's tax system. [2]

• List – I cover those areas where legislation is made by the Indian Parliament.

• List – II includes the jurisdictions assigned to state legislatures.

• List – III questions the potential for cooperation between India's state governments and parliament.

Concept of Tax 'Tax' comes from the Latin word 'Taxo,' which means 'to weigh' or 'to assess. Taxes are the obligatory monetary charges imposed by the government on various forms of income, goods, services, activities, and deals. The government relies heavily on taxation to fund programs that improve the lives of its citizens. In India, taxes are collected both at the federal and state levels. Local governments like the Municipality also levy a few small levies. No tax must be imposed or collected without the due process of law, as guaranteed by Article 265 of the Constitution. As a result, legislation at either the Federal or state level is required to support every kind of tax.[3]

The Indian tax system is an important component of the country's infrastructure since it promotes economic growth. Paying your fair share of taxes allows you to do things like: 1. One benefit of paying taxes is that it facilitates receiving compensation in the event of an accident or other mishap. 2. Second, tax revenue is crucial to the government's ability to provide a decent quality of life for its citizens. 3. For those who are willing to pay their fair share of taxes, life insurance policies may be purchased with benefits ranging from fifty thousand to one million rupees. 4. The Individual Tax Return (ITR) serves as evidence of income when applying for a loan or credit card, making tax payment a prerequisite for these financial products.

In India, there are two main categories of the taxation imposed by the Central and State governments:  Direct Taxes

and indirect taxes on your spending. Whether a person, a HUF, or a corporation, the direct tax duty must be paid by the earning party.[4] Businesses that sell services and goods are the primary collectors of indirect taxes. As a result, these organizations are liable for making indirect tax deposits. Direct Taxes: To put it simply, a direct tax is paid straight from the taxpayer to the tax collector (generally the government). It is impossible to pass the buck on a direct tax on someone else. The burden of making the required tax payment rests squarely on the shoulders of the assessed person or entity. Direct tax administration, including policy development, is the responsibility of the Central Board of Direct Taxes.

Indirect Taxes: Indirect tax may signify several different things. An indirect tax, in the common meaning, is collected by an intermediary (such as a retail shop) from the person who ultimately pays the economic cost of the tax (the end customer) (such as the consumer).

India receives over half of its budget income from direct taxes. Of course, income tax isn't the sole kind of direct taxation. Direct Taxes in India come in the following forms.:

• Income Tax

• Capital Gains Tax

• Corporate Tax

The incomes of people in India cover a wide spectrum. That's why it's fair to tax people differently according to their income levels. Various tax rates apply to different income brackets under the Income Tax Act. In this context, "tax slabs" refers to several categories. Both Session.[6]

Only gains from the sale of a capital asset are subject to capital gains tax. Capital gains tax rates vary from one sort of gain to the next. The Capital Gains Tax is split into two categories under the Income Tax Act of 1961: Short-Term Capital Gains Tax Long-Term Capital Gains Tax Short-term capital gains are when the assets are sold within a specified period, for example: The acquisition and subsequent sale of shares in less than a year. Exchanged for cash within 36 months after purchase, debt mutual fund shares Any real estate or gold sold within 36 months after the acquisition A long-term capital gain or loss is the result of the sale of an asset after a certain period has elapsed. You may be eligible for the indexation benefit on long-term capital gains, depending on the asset type. By adjusting your capital gains for inflation, indexation lowers your effective tax rate.

Businesses and other legal entities that file their tax returns as corporations are subject to corporate taxation. Another rate is based on the company's annual revenue slab.

The Indian government's most reliable and greatest income stream has always been indirect taxes.

• Service Tax

• Indian Excise Duty

• Value Added Tax (VAT)

• Customs Duty

• Securities Transaction Tax (STT)

• Stamp Duty

• Entertainment Tax

Numerous products and services in India are no longer subject to indirect taxes such the service tax, value-added tax, and excise duty. Rather than having many sales taxes, there is now only one, known as the Goods and Services Tax.[7] Goods imported into India from other countries, and in certain situations, those exported out of India, are subject to customs duty tax. Exchanges of financial securities are subject to the Securities Transaction Tax (STT). Securities such as stocks, mutual fund shares, futures contracts, and options contracts are examples of equities. All trades involving the buying and selling of securities are subject to this tax. Stamp duty and STT must be paid even when securities are traded off-exchange or over the counter. Investors and traders alike may save money on both their short- and long-term capital gains taxes thanks to STT. The transfer of property within a state is subject to a stamp duty imposed by the state government. Use it as evidence that you possess the asset or security in a court of law. Transactions in India's entertainment industry are subject to a tax that is both a federal and state responsibility. Entertainment venues and industries will include the likes of new film releases, athletic events, concerts, amusement parks, theaters, etc.[8]

REVIEW OF LITERATURE

Mario Mansour (2015) has analyzed the current state of taxes and revenue collection in the MENA region. He concluded that indirect tax revenue has played a little role as a revenue generator, whereas income tax has helped offset some of the money lost due to trade liberalization.. [9] Kumat, (2014) the scope of the Indian tax system and efficiency of India's tax system is still a top priority. [10] Jha, (2013) In his study of the Indian tax system and its impact on businesses and individuals, recommends raising direct taxes on the wealthy to make up for the decline in revenue from indirect taxes. He also calls for the regulation of corporate tax avoidance methods including transfer pricing.[11] William G. Gale, Benjamin H. Harris (2011) The conclusion is drawn that revenue increases will be an essential component of any solution to the fiscal crisis confronting any nation by analyzing the possibilities and obstacles that the fiscal problem generates for generating revenues and changing taxes. [12] Rao, (2005) study, "Tax system reforms in India: success and problems ahead," zeroes in on the progress made at both the federal and state levels. He says these changes are just the start, and that much more work has to be done to improve the tax system. [13] Goyal,( 2018) has said that the GST is the most significant tax reform in India since 1947. The complexity of GST compliance, as shown by the report, may leave taxpayers bewildered. In addition, India's GST Structure has a variety of tax brackets rather than a single uniform rate. For GST to be successfully implemented, the researcher believes that the current IT infrastructure must be modernized. [14] Agrawal, (2018) has researched the advantages and disadvantages of India's GST. According to the study's findings, the Goods and Services Tax (GST) would help the Indian economy expand and make running a company less cumbersome. The Goods and Services Tax (GST) would streamline the country's logistics and supply chain and bring about the necessary rise in state-based tax parity. [15] Nayyar & Singh, (2018) has said that the GST is a game-changing tax reform that would unite the whole nation under a uniform tax levy. According to the study, the Goods and Services Tax (GST) would improve India's tax revenue by removing obstacles between the federal government and state governments on the issue of taxes. The analysis also pointed up problem spots that the government should address to make GST a success. [16] Vij, (2018) has highlighted the issues plaguing the present Goods and Tax system, noting that businesses are having trouble with things like monthly reports, the GSTN site, and many tax slabs and that the GST has failed to combat corruption and tax fraud even as new forms of tax evasion

hindrance. [17] Yadav & Shankar, (2018) has elucidated how the GST Structure put in place in India stands apart from any other system in the world. In India, the Goods and Services Tax (GST) system is administered by the GST Council and is founded on the federal concept. Each state's finance minister serves on this organization, and the country's finance minister chairs the group. The study's author stresses the importance of some variables, including industry adaptation, technological infrastructure, and the ability of government employees to troubleshoot, for the tax to be successful. The global business community as a whole will examine the ramifications of this change. [18]

OBJECTIVES

• To examine the tax structure and tax-to-GDP ratio of India.

• To study the tax revenue collection in terms of direct and indirect taxes.

• To study the contribution of direct and indirect taxes in total tax revenue collection.

METHODOLOGY

This research paper is purely based on secondary data. Various figures are obtained from the newspapers, journals, websites, and annual reports of the Ministry of Finance of the Government of India.

DATA ANALYSIS

From Rs. 648966 crores and Rs. 1230177 crores in 2013–14 to Rs. 996185 crores and Rs. 2015743 crores in 2017–18, Table 1 demonstrates a rise in direct tax collection and indirect tax collection. The combined amount of direct and indirect taxes rose from Rs. 1879143 crores in 2013–14 to Rs. crores in 2017–18.

total revenue. This demonstrates that the amount collected via indirect taxes is almost twice as much as the amount collected through direct taxes.

Table 3 demonstrates that the primary source of direct tax revenue collection is corporation tax, which is followed by income tax, land revenue, agricultural tax, and hotel receipt tax. While other taxes helped direct tax income in 2017–18 reach Rs. 8189 crores. Table 3: Direct Tax Revenue Collection (Rs. in Crore) Table 4 demonstrates that the general sales tax,

helped the government collect Rs. 15008 crores in indirect taxes in 2017–18.

The average ratios for direct taxes to GDP, indirect taxes to GDP, and total taxes to GDP are 5.66, 11.38, and 17.04, respectively, according to Table 5. This indicates that indirect taxes contribute more to India's GDP than direct taxes do.

2013-14 5.78 10.95 16.73 2014-15 5.64 10.72 16.36 2015-16 5.46 11.50 16.96 2016-17 5.59 11.93 17.52 2017-18 5.83 11.79 17.62

Average 5.66 11.38 17.04

CONCLUSIONS

India relies on indirect taxes to collect taxes. The primary source of revenue for direct taxes is corporation tax. The primary source of indirect tax revenue is general sales tax. Indirect taxes make up a larger portion of the GDP than direct taxes. To increase direct tax contribution to total tax revenue collection, the government should implement structural reforms. The need to harmonize and streamline tax laws is great.

REFERENCES

1. Alchian, A& H Demistez (2002). "Production information coasts and Economic Organization" American Economic Review, 62. 2. Brodersen, C.(2001). Taxation of Cross-boarder Electronic Commerce Germany", 25 Inter tax - International Tax Review, issue. 3. Henrich, H. Henry "A General Theory of Tax Structure change during Economic Development", Harward Law School, Cambridge, 1966 4. Nimmer, Raymond T. and Patricia A .Krauthaus (2010). "International Taxes - Internet use for Tax avoidance under investigation", Daily Tax Report, February. 5. Sharma, Vakul "E-commerce; new business paradigm" in S.K Verma and Raman Mittal(ed.) Legal Dimensions of Cyberspace p.no.51, 6. Bholane K. P. (2013). FDI in Indian Retail Sector – Advantages and Disadvantages. ZENITH International Journal of Business Economics & Management Research, Vol. 3(5), pp. 243-

Industrial Corridor. Conference Proceeding onDMIC- Challenges and Prospects of Indian Economy, Vol. 1, pp. 51-54. 8. Bholane K. P. (2017). Structure and Impact Assessment of GST in India. Vidyawarta Research Journal - Special Issue, pp. 275-281. 9. Mario Mansour (2015) Indian Tax Structure- An Analytical Perspective. International Journal in Management and Social Science, Vol. 3 (9), pp. 242-252. 10. Kumat H. (2014). Taxation Laws of India- An Overview and Fiscal Analysis 2013-14. Indian Journal of Applied Research, Vol. 4(9), pp. 82-84. 11. Jha A. (2013). Tax Structure in India and its effect on corporates. International Journal of Management and Social Sciences Research (IJMSSR), Vol. 2(10), pp. 80-82. 12. William G. Gale, Benjamin H. Harris (2011) A Policy Shift from Economic Growth to Green Growth with Special Reference to India. EXCEL International Journal of Multidisciplinary Management Studies, Vol. 3(12), pp. 126-132. 13. Rao G. M. (2005). Tax System Reform in India: Achievement and Challenges ahead. Journal of Asian Economics, Vol. 16(6), pp. 993-1011. 14. Goyal, D. A. (2018). GST Pitfalls after Implementation in India. GST Simplified tax system: challenges and remedies (pp. 9-13). Ghaziabad: NRJP, Swarajanli Publication 15. Agrawal, A. (2018). GST in India: A blessing or a Curse. GST Simplified tax system: challenges and remedies (pp. 16-18). Ghaziabad: NRJP, Swaranjali Publication 16. Nayyar, A., & Singh, I. (2018). Comprehensive analysis of Goods and service tax in India. Indian Journal of Finance, 58-73. 17. Vij, D. D. (2018). A Study on GST (Goods and Service Tax): The Way Forward. International Journal of Academic Research and Development, 13-18. 18. Yadav, S., & Shankar, R. (2018). Goods and Service tax: how and why. Journal of Advances in Management Research, 2-3. Associate Professor, D.A.V College, Sadhaura, Yamuna Nagar - 135204