Skip to main content

Tax and its types

Tax & its types


Tax is a compulsory levy which government imposed on us and we are bound to pay from personal obligation without expecting of any return of service or good from the government.

Tax is a public revenue. There are small distinctions between public revenue and public receipt.Public revenue is a narrower concept than public receipt. Public revenue includes income from tax, administrative revenue, tax on goods and services, gifts and grants etc.While public receipt include income from all sources, like borrowing, income from sell of asset etc.
Public receipt=public revenue+income from all other sources+public borrowing from bank+income of the sale of public asset etc.

Public revenue is divided in to two parts. Tax revenue and Non tax revenue.

(A)  Tax revenues are
1) Tax on income, expenditure tax, corporation tax and all other taxes related to income.
2) Gift and grant tax, estate duty, wealth taxes are considered as property tax.
3)Indirect tax like good and service tax, Earlier which is known as custom duty(Tax on import or export of good within the country or outside the country),excise duty(Tax on production  by companies).Now all indirect tax  is  known   as GST only.

(B)Non tax revenues are
1)   Revenue from various government activities and services such as police, administrative service, transport and communication public work etc.

2) Interest receipt from loan given by government to other entities. Income receipt on government investment in companies.

3) Income receipt from fiscal services like post and telegraph, telephone etc.

4) Grants received from foreign country or state received grants from central government.

Direct and indirect burden of taxation

From the earlier discussion it is clear that Direct and Indirect tax both are tax revenue of the government. The example of direct tax are income tax, wealth tax,gift tax ,corporate tax etc.In case of direct tax the tax burden are impose on a particular  individual and he/she is bound to pay the tax. In that case the tax burden is not shifted to any other .If the marginal utility of income is constant then in direct tax regime every individual have to pay a percentage of his income. This is known as proportional tax structure. But in real situation marginal utility of income is diminishing. That is as income increases marginal utility of the additional unit of income decreases and vise versa. Therefore for equality in sacrifice, the tax burden should be more on rich than on poor. This is known as progressive tax structure. If we go through the budget we will see that in income tax  after a certain slab the percentage of tax rate is high.

But the matter is different for the indirect tax .In indirect tax the price is levied on goods and services are the same for all. Moreover the tax burden is shifted from producer to consumer .Here the tax burden is imposed on producer but the ultimate tax burden bear the consumer.So indirect tax is called regressive tax. In India income tax is progressive tax and indirect tax is regressive tax in nature.

Though taxation in these days is not used as means of raising revenue only, but it is an important instrument for achieving socio economic objectives also. Such as regulation of consumption and production, controlling  inflation, promoting economic growth removing inequality of incomes and so on.


Comments

Popular posts from this blog

Types of Patta or Deed of settlement prevail in India

                                                        Types of Patta               T he special lands which government holds are distributed among the landless family in four ways. So we can say that there are four types of deed of settlement or patta prevail in India. They are   1) Agriculture patta , 2)Nijo Griho Nijo Bhumi (NGNB) 3) Forest patta and 4)Refugee Patta 1) Agriculture Patta –Agriculture patta mainly given for agriculture purpose to share copper and tenant farmers.(maximum amount of land that have given   by the government is one acre, depending upon how much barga farmers actually hold.)Agriculture patta really motivates the landless farmer and encourage to implement the new technique to produce more. Before the agriculture patta where share copper bound ...

How GST works

Now a day’s GST is the most important topic to discuss .As our prevailing Government has change the total indirect tax structure through GST. All we know the full form of GST is Good and service tax but the confusion arises when some commodity is cheaper and some are dearer. In our federal structure there are two types of tax , direct tax and indirect tax . Income tax, interest tax, wealth tax corporation tax all are fall under the direct tax regime &custom duty, excise duty, sales tax, service tax all are example of service tax. As GST is implemented on indirect tax so we have to clear it that our income tax is not takes effect through it. Indirect tax is called regressive tax because when a tax levied to someone it will be passed to the other & the weaker section bear a heavy tax burden than the richer section. So to minimize the tax burden & for more transparency GST is a better way. GST is a single tax system which unified our tax structure &give ...

Tax and its principle

Canon of taxation A good taxation system must achieve some major objectives from the justification ground, which is able to turn the taxation system more equitable for the public and at the same time decrease inequality from the society. This principle must be fit for social welfare context also. To achieve this criteria the great economist Adam Smith suggested four important set of principle. This is popularly known as Canon of taxation.Some other economist also suggested some more canon of taxation. The major four canon of taxation which is prescribed by Adam Smith are 1) Canon of equality - taxation is not a process of collection of tax only rather it has some major objectives also. To erase inequality from the society it may takes an important steps. In realistic situation we face income is subject to diminishing marginal utility .That means if income increases the utility derived from the additional unit is decreases. In that case if same percentage of tax is applicabl...