Page 249 - General Knowledge
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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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