Page 249 - General Knowledge

GENERAL KNOWLEDGE 2019

 Each state gets that amount of the tax as is collected within its territory.
 Succession duty, estate duty on property other than agricultural land, taxes on railway fares
and freights, taxes on newspaper sales and advertisements etc. fall in this category.
 Thirdly, certain taxes are levied and collected by the union but the proceeds are distributed
between the centre and the states.
 Taxes on non-agricultural incomes (Art. 270) and excise duties on items in the union list
accept medicinal and toilet preparations, fall in this category.
Methods of Taxation
 There are three methods of taxation prevalent in economics with their individual merits and
demerits.
 Progressive taxation
 A progressive tax is a tax in which the tax rate increases as the taxable amount
increases.
 The term "progressive" refers to the way the tax rate progresses from low to high, with
the result that a taxpayer's average tax rate is less than the person's marginal tax rate.
 Regressive Taxation
 A regressive tax is a tax imposed in such a manner that the tax rate decreases as the
amount subject to taxation increases.
 "Regressive" describes a distribution effect on income or expenditure, referring to the
way the rate progresses from high to low, so that the average tax rate exceeds the
marginal tax rate.

 Proportional taxation
 A proportional tax is an income tax system where the same percentage of tax is levied
from all taxpayers, regardless of their income. A proportional tax applies the
same tax rate across low-, middle- and high-income taxpayers.
 Central Government levies taxes on the following:
 Income Tax: Tax on income of a person
 Customs duties: Duties on import and export of goods.
 Central excise: Taxes on Manufacturing of dutiable goods.
 Service tax: Taxes on provision of services.
State Governments can levy the following taxes:
 Value Added Tax (VAT)
 VAT is tax on sale of goods.
 While the intra-state sale of goods is covered by the VAT Law of that state, inter-state sale of
goods is covered by the Central Sales Tax Act.
 Even the revenue collected under Central Sales Tax Act is done so by the State
Governments themselves and actually the Central Government has no role to play so.
 Implementation of VAT: At the meeting of the Empowered Committee of State Finance
st
Ministers held on 18 June 2004, it was resolved to introduce VAT at the State Level from 1
April 2005.
 VAT being a State subject, the Central Government has been acting as a facilitator for its
successful launching and implementation.

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