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Semester 5: B.B.A., INTERNATIONAL BUSINESS
Objectives of Taxation, Canons of Taxation, Tax System in India, Direct and Indirect Taxes, Meaning and Types
Objectives of Taxation, Canons of Taxation, Tax System in India, Direct and Indirect Taxes, Meaning and Types
Objectives of Taxation
1. Revenue Generation: Taxes are collected to fund government expenditures and public services. 2. Redistribution of Income: Taxes help reduce income inequality through progressive taxation. 3. Economic Stability: Taxes can be used to regulate economic activity and achieve macroeconomic goals. 4. Behavioral Incentives: Taxes can encourage or discourage certain behaviors, such as promoting savings or reducing pollution.
Canons of Taxation
1. Equity: The tax system should be fair, where taxpayers with similar ability to pay contribute similarly. 2. Certainty: Taxpayers should clearly understand how much tax they owe and when it is due. 3. Convenience: Payment of tax should be convenient for taxpayers, preferably collected at a time and manner easy for them. 4. Economy: The cost of collecting tax should be low relative to the revenue generated.
Tax System in India
1. Structure: India's tax system comprises both direct and indirect taxes. 2. Central and State Taxes: Central government and state governments levy taxes separately. 3. Reforms: The tax system has undergone various reforms, including the introduction of the Goods and Services Tax (GST). 4. Compliance: The government focuses on improving tax compliance and administration.
Direct and Indirect Taxes
1. Direct Taxes: Taxes directly levied on individuals or organizations, such as income tax and corporate tax. 2. Indirect Taxes: Taxes levied on goods and services, collected by intermediaries, such as sales tax and GST. 3. Characteristics: Direct taxes are based on the taxpayer's income, while indirect taxes are consumption-based.
Meaning and Types of Taxes
1. Definition: Tax is a financial charge imposed by the government on individuals and organizations to fund public services. 2. Types: Major types of taxes include income tax, corporate tax, sales tax, value-added tax (VAT), and property tax. 3. GST: A significant reform, GST integrates various indirect taxes into a single tax for easier compliance and reduced tax burden.
Income Tax Act 1961: Basic Concepts and Definitions - Income, Assessee, Person, Previous Year, Assessment Year, Gross Total Income, Total Income, Permanent Account Number, Return of Income, TDS, Rates, Filing, Advance Tax, Assessment Procedure
Income Tax Act 1961: Basic Concepts and Definitions
Income
Income refers to the monetary gain earned by an individual or entity over a period. It includes salaries, profits, interest, dividends, and rental income. Under the Income Tax Act, income can be categorized into five heads: income from salary, income from house property, income from business or profession, income from capital gains, and income from other sources.
Assessee
An assessee is any person who is liable to pay tax or any other sum under the Income Tax Act. This includes individuals, companies, firms, and associations of persons. An assessee can be categorized as a resident or non-resident based on their physical presence in India during a particular period.
Person
The term person under the Income Tax Act includes a variety of entities such as individuals, Hindu Undivided Families, companies, firms, associations of persons, bodies of individuals, and even local authorities. This broad definition ensures that all forms of entities that earn income are subject to taxation.
Previous Year
The previous year refers to the financial year in which the income is earned. It is the year immediately preceding the assessment year and is crucial for determining the income liable to tax. For example, if the assessment year is 2022-23, then the previous year is 2021-22.
Assessment Year
The assessment year is the year following the previous year during which the income earned in the previous year is assessed and taxed. If an individual earns income in the financial year 2021-22, the assessment year would be 2022-23.
Gross Total Income
Gross Total Income is the sum of income from all heads before availing any deductions under the Income Tax Act. It includes total income from salaries, house property, business/profession, capital gains, and other sources. This amount serves as the basis for determining the total taxable income.
Total Income
Total Income is the Gross Total Income minus any deductions allowed under the Income Tax Act. This is the income that is actually subject to taxation. It forms the foundation for calculating the tax liability.
Permanent Account Number (PAN)
PAN is a ten-digit alphanumeric code issued by the Income Tax Department to individuals and entities. It serves as a unique identifier for taxpayers and is essential for various financial transactions, including filing taxes and receiving tax refunds.
Return of Income
Return of Income is the document that taxpayers file with the Income Tax Department to declare their income and the tax payable on it for a specific assessment year. It includes details of income earned, tax paid, and any claims for deductions.
Tax Deducted at Source (TDS)
TDS is a method of collecting income tax at the source of income. Under this provision, certain payments such as salaries, interest, and commissions are subject to tax deduction before the amount is disbursed. The deducted amount is then deposited with the government.
Rates
Income tax rates are determined by the government and are classified based on the income level of the taxpayer. Different rates apply to individuals, firms, companies, and other entities, often with varying slabs applicable for different categories of taxpayers.
Filing
Filing refers to the process of submitting the Return of Income to the Income Tax Department. Taxpayers must file their returns within the due date specified in the Income Tax Act to avoid penalties.
Advance Tax
Advance Tax is the tax that individuals and corporates need to pay on their estimated income in a financial year. It is paid in instalments instead of a lump sum, ensuring that taxpayers meet their tax obligations throughout the year.
Assessment Procedure
The assessment procedure involves the examination of the return of income filed by an assessee. It may include scrutiny of accounts, verification of claims, and calculations of tax liability. The procedure aims to determine the correctness of the income declared and the tax paid.
Customs Act 1962: Introduction, Objectives, Definitions, Functions and powers of customs authorities, types of customs duties, Classification of goods, procedure for assessment and methods of valuation for customs, demand and recovery of customs duty, procedure for claiming customs duty drawback
Customs Act 1962
Introduction
The Customs Act of 1962 is legislation enacted in India to regulate the import and export of goods. It is designed to prevent smuggling and ensure the collection of customs duties.
Objectives
The main objectives of the Customs Act include facilitating legitimate trade, protecting national interests, ensuring proper assessment and collection of customs duties, and preventing smuggling.
Definitions
Key definitions in the Customs Act include customs duties, goods, import, export, and customs authorities. Each term delineates the scope and application of the Act.
Functions and Powers of Customs Authorities
Customs authorities have the power to inspect goods, enforce customs laws, undertake investigations, levy duties, and seize goods as per the provisions of the Act.
Types of Customs Duties
The types of customs duties include basic customs duty, countervailing duty, anti-dumping duty, and safeguard duty. Each serves to protect domestic industries and regulate trade.
Classification of Goods
Goods are classified under the Customs Act based on the Harmonized System of Nomenclature (HSN), which aids in determining applicable customs duties and regulatory requirements.
Procedure for Assessment
Assessment under the Customs Act involves the evaluation of the value of goods for duty purposes. This includes understanding the method of valuation and addressing any disputes in assessment.
Methods of Valuation for Customs
Various methods of valuation are prescribed under the Act, primarily relying on transaction value, which reflects the price actually paid or payable for the goods.
Demand and Recovery of Customs Duty
The Act outlines procedures for the demand and recovery of customs duties in cases of shortcomings. This includes issuing show cause notices and conducting adjudications.
Procedure for Claiming Customs Duty Drawback
Customs duty drawback is a refund of duties paid on goods that are subsequently exported. The procedure involves the submission of specific forms and evidence of export.
Goods and Services Tax (GST): Definitions, business related persons, capital goods, levy and collection of tax, mixed supply, composite supply, advantages and disadvantages of unregistered supplier, time and value of supply, goods and services, input tax credit, Registration of GST, person liable for registration
Goods and Services Tax (GST)
Definitions
GST is a comprehensive tax levied on the supply of goods and services. It is a value-added tax that combines various indirect taxes into a single tax structure.
Business Related Persons
Individuals or entities that are connected by financial, economic, or legal relations that influence their business interactions under GST are considered related persons.
Capital Goods
Capital goods are assets used by businesses to manufacture products and provide services. Under GST, input tax credit can be claimed for capital goods.
Levy and Collection of Tax
GST is levied at each stage of the supply chain, and the tax is collected through a systematic process outlined in the GST Act.
Mixed Supply
A mixed supply refers to the supply of two or more individual goods or services where one price is charged.
Composite Supply
Composite supply consists of two or more goods or services supplied together as one supply, with one being the principal supply.
Advantages and Disadvantages of Unregistered Supplier
Unregistered suppliers do not collect GST and may face challenges in competitiveness, as registered suppliers can claim input tax credits.
Time and Value of Supply
The time of supply determines when the GST is levied, while the value of supply refers to the value at which goods and services are supplied.
Goods and Services
Goods are tangible items, while services are intangible activities. Both are subject to GST.
Input Tax Credit
Input tax credit refers to the credit available to taxpayers for the tax paid on inputs, allowing them to reduce their GST liability.
Registration of GST
Businesses with a specified turnover must register for GST, allowing them to collect GST on supplies and claim input tax credits.
Person Liable for Registration
The person liable for registration includes any individual, partnership, company, or organization that meets the GST registration threshold.
Returns, Tax payment and Penalties under GST
Returns, Tax payment and Penalties under GST
Overview of GST Returns
GST Returns are the regular documents that a taxpayer needs to file with the GST authorities. These returns provide information about the sales, purchases, and the amount of tax collected and paid, thereby enabling the government to assess tax liabilities and compliance.
Types of GST Returns
There are various types of GST Returns based on the nature of the taxpayer and their transactions, including GSTR-1 for outward supplies, GSTR-2 for inward supplies, GSTR-3B for simplified return, and annual returns among others.
Filing of GST Returns
Taxpayers must file their GST returns periodically, which may be monthly or quarterly, depending on their classification. Timely filing is crucial to avoid penalties.
Tax Payment Mechanism
After filing returns, taxpayers are required to pay the tax due. Payment can be done online through the GST portal, and it's essential to ensure payment is made before the due date to avoid penalties.
Penalties for Non-compliance
Failing to file GST returns on time or underpayment of tax can result in penalties. This could be a fixed amount or a percentage of the tax due. Frequent non-filing may also result in suspension of GST registration.
Importance of Compliance
Compliance with GST filing and payment is critical for business operations. It helps maintain a good standing with tax authorities and avoids any legal repercussions.
