ST. ANSELM’S SR. SEC.

SCHOOL, AJMER

SUBMITTED BY: HARSH GUPTA

CLASS: XII COMMERCE
ROLL NO.: 4055
SUBMITTED TO: ARTI GUPTA
 ACKNOWLEDGEMENT
It gives me immense pleasure in expressing my deep gratitude
Rev. Fr. Nelson V. principle of st. anselm's sr. sec. school ajmer
who provided me platform to reveal my creativity,
i would also like extend my greatest thanks to Mrs. Arti Gupta (PGT
Commerce), my teacher in economics for her valuable guidance
throughout the work on the topic and making it useful. I am thankful
to my who directly or indirectly helped me throughout. My gratitude
to my beloved parents, whose instant encouragement and support
has helped me in completing my project in scheduled period.
with honor and regards

Teacher’s sign __________________

 Certificate
This is to certify that Harsh Gupta of class 11 Commerce has
Successfully completed this project under my supervision.
He has taken keen interest and shown utmost sincerity in completion
Of this project .

He has successfully completed the project work Economics upto my

satisfaction.

Teacher’s Signature
TAX SYSTEM AND TAX
REFORMS INDIA
 INDEX
• INTRODUCTION
• TYPES OF TAXES
• TYPES OF DIRECT TAX IN INDIA
• TYPES OF INDIRECT TAX BEFORE INTRODUCTION OF GST
IN INDIA
• GST
• TAXES REPLACED BY GST
• TAXES NOT REPLACED BY GST
• TAX REFORMS IN INDIA
• CONCLUSION
 WHAT IS TAXATION ?
The Central and State government plays a significant role in
determining the taxes in India. To streamline the process of
taxation and ensure transparency in the country, the state and
central governments have undertaken various policy reforms over
the last few years. One such change was the Goods and Services
Tax (GST) which eased the tax regime on the sale and deliverance
of goods and services in the country.
TYPES OF
TAXES
 TYPES OF TAXES
The tax structure in India can be classified into two main categories:

•Direct Tax: It is defined as the tax imposed directly on a taxpayer and is required

to be paid to the government. Also, an individual cannot pass or assign another
person to pay the taxes on his behalf.

•Indirect Tax:It is defined as the tax levied not on the income, profit or revenue
 but the goods and services rendered by the taxpayer. Unlike direct taxes, indirect
taxes can be shifted from one individual to another. Earlier, the list of indirect
taxes imposed on taxpayers included service tax, sales tax, value added tax (VAT),
central excise duty and customs duty.
 Types of Direct Taxes in India
The various types of direct taxes levied on citizens by the Government Of India
are as follows:

1) Corporate Tax
Under the Indian Income Tax Act, 1961, both Indian as well as foreign
organizations are liable to pay taxes to the government. The corporate tax is
levied on the net profit of domestic firms. Also, foreign corporations whose
profits appear or are deemed to emerge through their operations in India are
also liable to pay taxes to the Government of India. The income of a company,
be it in the form of dividends, interest and royalties, is also taxable.
At present, companies having gross turnover up to Rs.250 crore are liable to
pay corporate tax at 25% of the net profit while companies with a gross
turnover of more than Rs.250 crore are liable to pay the corporate tax at 30%.
Apart from this, other types of corporate tax include the following:
Minimum Alternative Tax (MAT): MAT is imposed on “zero tax companies”, which typically refer
to companies that declare little or no income in order to save tax.

Fringe Benefits Tax (FBT): The FBT tax is imposed on the fringe benefits like drivers and maids
provided/paid for by companies to their employees.

Dividend Distribution Tax (DDT): An amount that is declared, distributed or paid as dividend to
the shareholders by a domestic company is taxed under the Dividend Distribution Tax. It is
applicable to domestic companies only. Foreign companies distributing dividends in India do not
pay this tax (such dividends are taxable in the hands of the shareholder).

Securities Transaction Tax (STT): The SST is imposed on the income which the companies get
through taxable securities transactions. This tax is free of any surcharge.
2) Income Tax

Income tax is perhaps the most well known direct tax imposed by
the government on annual income generated by businesses and
individuals. The income tax on income generated by the business
houses is known as Corporate Tax. Income tax is calculated as per
the provisions of Income Tax Act, 1961 and is directly paid to the
central government on an annual basis. The income tax rate
depends on the net taxable income or the tax bracket. Income tax
may be deducted in the form of TDS (tax deducted at source) in case
of salaried employees. However, in case of self-employed
individuals, the tax is payable on the basis of declared income as per
their Income Tax Return subsmission. ITR is basically a statement of
income and the tax liability (on the basis of income declared) which
is submitted to the Income Tax Department in the prescribed format
Income tax is levied on various sources of income including Income
from salaries, from capital gains, from business, income from house
property or other sources.
3) Capital Gains Tax

The capital assets of an individual refer to anything owned for personal use or for the purpose of an
investment. For businesses, the capital asset is anything that can be used for more than a year and is
not intended to be sold or liquidated during the course of business operation.
Machinery, cars, homes, shares, bonds, art, businesses and farms are some of the examples of capital
assets.
The capital gains tax is imposed on the income derived from the sale of investments or assets. On the
basis of the holding period, capital tax is categorised under short-term gains and long-term gains. The
formula to calculate the capital gains is:
Capital Gains = Sale Value – Purchase Value
The capital gain is considered as Long Term Capital Gain (LTCG) if
Real Estate Property is sold after 2 years of holding period
Debt funds or any other asset with a holding period of more than 3 years
Equity investments/equity mutual funds with a holding period of more than 1 year
 TYPES OF INDIRECT TAX BEFORE INTRODUCTION OF GST
IN INDIA
1. Service Tax in India
Service Tax is a tax which is levied on the Services provided by an entity. If an
entity is providing any service, they are required to levy Service Tax on the
same. This service tax is collected from the recipient of service and deposited
with the Central Govt.
To read more about Service Tax, you may refer this article on 
What is Service Tax and Current Rate of Service Tax in India.
Service Tax is levied on all services except the Services specified in the 
Negative List of Services. Apart from this, Service Tax Exemption is allowed to
Small Scale Service Providers if the Total Value of Services provided by them
during the year is less than Rs. 10 Lakhs.
2. Excise Duty in India
Excise Duty is an indirect tax levied on those goods which are
manufactured in India. The taxable event in this case is
manufacture and the liability of central excise duty arises as soon
as the goods are manufactured. It is a tax on manufacturing which
is paid by the manufacturer, who passes its incidence on to other
customers and recovers the same from them.
The rules and provisions as mentioned in the Central Excise Act,
1944 are applicable for the levy of excise duty in India. This tax is
also levied by the Central Govt.
3. VAT in India

VAT stands for Value Added Tax and is levied on the sale of movable
goods in India. VAT is a multi-point destination based system of
taxation, with tax being levied on value addition at each stage of
transaction in the production/ distribution chain. The term ‘value
addition’ implies the increase in value of goods and services at each
stage of production or transfer of goods. VAT is a tax on the final
consumption of goods or services and is ultimately borne by the
consumer
VAT is basically a state subject, derived from Entry 54 of the State List,
for which the States are sovereign in taking decisions. The State
Governments, through Taxation Departments, are carrying out the
responsibility of levying and collecting VAT in the respective States
4. Customs Duty in India
Customs Duty is a type of Indirect Tax which is levied on goods which are
imported into India. In some cases, it is also levied when the goods are exported
from India.
In India, the basic law for levy and collection of customs duty is Customs Act,
1962 . It provides for levy and collection of duty on imports and exports,
import/export procedures, prohibitions on importation and exportation of goods,
penalties, offences, etc.
5. Securities Transaction Tax (STT)
Securities Transaction Tax or STT is a type of Indirect Tax which is levied at the
time of sale/purchase of securities through the Indian Stock Exchanges. These
securities include Shares, Mutual Funds, F&O Transactions etc. 
Securities Transaction Tax was introduced in India by the 2004 Budget and is
applicable with effect from 1st April 2004.
The reason for the introduction of Securities Transaction Tax was to lower the tax
on short term capital gains and to make the long term capital gains exempted
from the levy of any tax.
6. Stamp Duty
Stamp Duty is an indirect tax levied by the State Govt’s on the transfer
of immovable property located in their state. It is also levied by the Govt
on all Legal Documents. The Stamp Duty Rates vary from State to
State.

7. Entertainment Tax
In India, Entertainment Tax is levied on every financial transaction that is
related to entertainment and is reserved primarily for the state
governments. Some forms of entertainment on which entertainment tax
is levied include Amusement Parks, Video Games, Arcades, Exhibitions,
Celebrity Stage Shows, Sports Activities etc.
Apart from the above mentioned Indirect Taxes, there are several other
Indirect Taxes in India as well like Luxury Tax, Sales Tax, Octroi etc.
 INTRODUCTION OF
GSTbegan in the year 2000 when a committee was set up
The GST journey
to draft law. It took 17 years from then for the Law to evolve. In 2017,
the GST Bill was passed in the Lok Sabha and Rajya Sabha. On 1st July
2017, the GST Law came into force.
 What is GST in India?
GST is known as the Goods and Services Tax. It is an indirect tax which has
replaced many indirect taxes in India such as the excise duty, VAT, services tax,
etc. The Goods and Service Tax Act was passed in the Parliament on 29th March
2017 and came into effect on 1st July 2017.
In other words,Goods and Service Tax (GST) is levied on the supply of goods and
services. Goods and Services Tax Law in India is a comprehensive, multi-stage,
destination-based tax that is levied on every value addition. GST is a single
domestic indirect tax law for the entire country.
Before the Goods and Services Tax could be introduced, the structure of indirect
tax levy in India was as follows:
 COMPONENTS OF GST

There are three taxes applicable under this system: CGST, SGST & IGST.

•CGST: It is the tax collected by the Central Government on an intra-state

sale (e.g., a transaction happening within Maharashtra)

•SGST: It is the tax collected by the state government on an intra-state sale

(e.g., a transaction happening within Maharashtra)

•IGST: It is a tax collected by the Central Government for an inter-state sale

(e.g., Maharashtra to Tamil Nadu)
in most cases, the tax structure under the new regime will be as follows:

Transaction New Regime Old Regime Revenue Distribution

Sale within the State CGST + SGST VAT + Central Excise/Service tax Revenue will be shared equally
between the Centre and the
State

Sale to another State IGST Central Sales Tax + There will only be one type of
Excise/Service Tax tax (central) in case of inter-
state sales. The Centre will
then share the IGST revenue
based on the destination of
goods.
1.Easy compliance:
A robust and comprehensive IT system would be the foundation of the GST regime in India.
Therefore, all tax payer services such as registrations, returns, payments, etc. would be available
to the taxpayers online, which would make compliance easy and transparent.
 2.Uniformity of tax rates and structures:
GST will ensure that indirect tax rates and structures are common across the country, thereby
increasing certainty and ease of doing business. In other words, GST would make doing
business in the country tax neutral, irrespective of the choice of place of doing business.
3. Removal of cascading:
A system of seamless tax-credits throughout the value-chain, and across boundaries of
States, would ensure that there is minimal cascading of taxes. This would reduce hidden
costs of doing business.
4. Improved competitiveness:
Reduction in transaction costs of doing business would eventually lead to an improved
competitiveness for the trade and industry. World Bank believes that the implementation of
the Goods and Service Tax (GST), combined with dismantling of inter-state check-posts, is the
most crucial reform that could improve competitiveness of India’s manufacturing sector.
5. Simple and easy to administer:
Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with
a robust end-to-end IT system, GST would be simpler and easier to administer than all other
indirect taxes of the Centre and State levied so far.
 TAXES REPLACED BY GST
THE CENTRAL TAXES REPLACED BY
•GST
Central excise duty
•Central sales tax
•Service tax
•Additional duties of customs
•Additional duties of excise
•Excise duty levied under the textiles and textile products

THE STATE-LEVEL TAXES REPLACED

BY GST
•Purchase tax
•Central sales tax
•VAT
•Surcharge and CESS
•Entry tax
•Taxes on lottery, gambling and betting
•Taxes on advertisements
 TAXES NOT REPLACED BY GST

1. Custom Duty
The Countervailing Duty (CVD) and Special Additional Duty (SAD) will subsume under GST, but
the Basic Customs Duty (BCD) will be charged according to current law only and not GST.

2. Stamp Duty
The buyer has to the pay stamp duty for the registration of the property, and GST will not cover
Stamp duty and will be subsumed as per the tax levied by the government.

3. Vehicle Tax

GST does not cover road tax, so the Vehicle Tax will not be charged under GST, and will remain
under the Motor Vehicle Act.
4. Excise on Liquor
For the time being, Liquor has been kept outside the GST. Alcohol needs a constitutional amendment to be
brought under the ambit GST. Though Industry Experts suggest, the GST will impact the sector negatively
in the future.

5. Tax on Sale and Consumption of Electricity

GST will not affect the Electricity Bills as of now, and the existing tax system of VAT and Central Excise will
prevail on Electricity Bills. The state will charge the VAT and Centre will levy the Central Excise.

6. Entry Taxes and Toll

GST will not cover the Toll Tax as such taxes like road tax, toll tax, environment tax and others are directly
paid by users and will be levied by States directly.

7. Entertainment Tax (Levied by Local Bodies)

The imposition of the extra tax by local bodies is not covered under GST. Hence, in addition to 28 per cent
GST, the local body extra tax will lead to Double Tax. This will indirectly lead to a sharp increase in the price
of the tickets.

8. Road Tax
GST will not cover the Road Tax as such taxes like toll tax, road tax, environment tax and others are
directly paid by users and will be levied by States directly.
What is Tax Reform?
Tax reform is a policy implementation by the government through which
few alterations are made into the tax system in order to overcome the
loopholes and enhance the effectiveness of the tax administration in the
country in order to generate higher revenues from taxes as compared to the
overall spending.

Explanation
Tax reform, as the name suggests, is a kind of reform made in the tax
system of a nation that can help the government of the same in minimizing
the chances of tax evasion and avoidance. It brings sustainability in the
revenue levels, addresses issues and conflicts concerning inequality
employing behavior change and redistribution, and also aids in the
development of a nation.
Purpose

Tax reform is introduced for multiple purposes. The first and foremost purpose
is to minimize the slightest of probabilities of avoidance and evasion of the tax
from the economy. Another purpose is to induce a higher rate of sustainability
in the revenue levels and directing the public investments into desired avenues
by means of providing tax deductions, tax breaks, and tax exemptions. The
ultimate purpose is to enhance the overall functioning of the tax system and
bring economic growth in the country.
Objectives

Tax reform is introduced to fulfill multiple objectives. It aims at improving the

efficiency of the tax administration and allowing it to become more systematic
by:
1.Decreasing the marginal tax rates.
2.Lowering the tax implication of savings and investment;
3.Lowering the occurrence and probabilities of tax avoidance and tax
evasion;
4.Lowering the total number of tax defaulters;
5.Improving economic decision-making;
6.Lowering the cost involved and time required to organize, plan and
implement the change in the tax system;
7.Uniform treatment in the case of industries, investments, and properties.
Types of Tax Reform
Basically three different types include:
1.Individual Income Tax Reform can be learned as a strategy that is used
for eliminating the income expenditures and payroll taxes incurred by an
individual.

2.Corporate Income Tax Reform can be learned as a strategy that is used

for administering the corporate income taxes and avoid distortions that
take place on account of special provisions and also boosts the economic
growth and development of an economy.

3.Other Reform Proposals are used to create and introduce new types of

taxes in the tax system for replacing or supplementing the current taxes.
Effects of Tax reform
The effects of such reform may not be the same for all taxpayers and economies
too. On the one hand, It might enhance the functioning of the tax system while,
on the other hand, it paves ways for political pressures that are short term in
nature. These reforms have somehow contributed to the creation of certain tax
incentives that has ultimately lead to the distortion in the economy and have even
marginalized not just the efficiency of the tax system but has also allowed it to
become more fair and transparent as compared to what it used to be earlier.

Need for Tax reform

There has always been an undying need for the changes in the tax system. The
collection of taxes is necessary for funding the services that are arranged and
provided by the government of a country. The tax system must be efficient enough for
the collection of a sufficient amount of revenues and boosting the economic growth of
a country. No matter how systematic the tax system of a country is, the taxpayers
 will find a way by identifying and taking advantage of the loopholes in the system
and avoid/ evade taxes. As a result of this, the need has risen and ensures that the tax
administration of a nation is totally organized.
Benefits

•Reduces marginal tax rates;

•Ensures that there is the same treatment for all, whether it’s a property,
industry, or an investment.
•Tax reform ensures that the rate of tax evasion and avoidance gets lowers
down.
•It ensures that the tax structure gets fully organized.
•It simplifies tax laws and encourages compliance.
•It widens the tax base and reduces per capita tax by dividing the tax
burden by bringing more and more taxpayers under the umbrella.
Limitations

1.Ignores the fact that it is the impact of the overall tax administration
that is important and not just individual taxes.
2.It makes the tax system more complicated.
3.It ignores the fact that the slightest of change in the tax system can
have a huge impact on the masses.

Tax reform focuses on strengthening the current tax system and

widens out the tax base. Tax reform aims at enhancing the efficiency
of the overall tax system by lowering marginal tax rates, reducing
taxation on investment and savings, boosting the economic
development of the nations, lowering the number of tax defaulters,
etc.