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Public Finance-1 - Delhi-Evening (Jan. 2024)
Public Finance-1 - Delhi-Evening (Jan. 2024)
Finance
PUBLIC FINANCE
a. Revenue Income
i. Tax Revenue: (Tax Vs. Cess and Surcharge, Laffer Curve, Fiscal
Perspective and Institutional Perspective)
1. Direct Tax
a. Income tax
b. Wealth tax (Abolished in 2014-15 and super rich surcharge was
increased by 2%. This surcharge was introduced in 2013-14.
c. Corporate Tax
i. Dividend Distribution Tax
d. Presumptive Tax
2. Indirect Tax
a. Excise Duty
i. Central Excise Duty: Reforms-: 1981-MANVAT, 1986-
MODVAT, 1999-2000-CENVAT
b. Customs Duty
i. Export Duty
c. Service Tax
ii. Non-Tax Revenue
b. Capital Income
• Income Tax + Dividend Distribution Tax + Wealth Tax = Direct Tax Code
(DTC)
I. Subsidy
II. Defence
III.Interest payment
IV. Administrative
1. Salary
2. Pension
3. Miscellaneous
• Since 2017-18 this Distinction has been done away with as now there is no
five-year plan model of development.
Loans:
Impact of Internal Loans:
Centre increased borrowing limit of Total net borrowing by states for 2020-21
states to 5% of GSDP from 3%. (Again stood at Rs 6.41 lakh crore, based on 3% of
3.5%) GSDP
0.5% 1% 0.5%
Improvements
0.25% in EoDB
Universalization of One
Nation, One Ration
1. Public Income:
3. MORAL HAZARDS
6. NON-PROFESSIONAL BUREAUCRACY
TAX V. CESS & SURCHARGE
TAXES: DIRECT & INDIRECT
DIRECT & INDIRECT TAXES: FINANCIAL &
INSTITUTIONAL PERSPECTIVE
WAYS TO IMPOSE TAXES
PROGRESSIVE, PROPORTIONAL AND REGRESSIVE AND DEGRESSIVE
T/Y
Progressive
Percent of Income paid in
Tax
taxes
Proportional
Tax
Regressive
Tax
Income
WAYS TO IMPOSE TAXES
SPECIFIC AND AD VALOREM
HOW TAX RATES ARE DECIDED: LAFFER CURVE
Public Finance
Functions of taxation:
• Raise revenues
• Income redistribution
• Till 1948: Progressive like Income Tax. This tax kicked in after Rs. 15,000/-
• 1949: Abolished
• 1957-1992: Made permanent
• 192-1999: linked with rate of inflation to provide relief to tax payers.
• 1999-2004: Capped at 10%
• 2004-2018: Abolished
IN 2018-19 NEW 10% CAPITAL GAINS TAX ON GAINS EXCEEDING RS. 1 LAKH ON
INCOME FROM INVESTMENT IN EQUITIES AND EQUITY MUTUAL FUNDS WAS
INTRODUCED.
IMPLICATION OF THIS CAPITAL GAINS TAX
CTT
CWT (2005-06 TO 2009)
1. PARTHASARATHI SHOME COMMITTEE OF TAX ADMINISTRATION REFORMS
COMMITTEE-2014
5. RATIONALISATION OF TAXES
6. WHY TO FORCE
7. DISPUTE REDRESSAL
FEW CONCEPTS
1. SPV
2. FISCAL DRAG
3. LTUs
1944-Central Excise
1956-Central Sales Tax 1962-Customs Act
Duty
● Cascading effect
● Multiplicity of indirect taxes
● Setting off not allowed/difficult in some case
● The transportation costs will add to the costs
● Lines between goods and services have blurred (eg-IPR are considered goods
for imposing sales tax and as services for imposing service tax)
Why was it delayed?
• Alcohol
• Electricity
• Education
• Healthcare
Old vs New
Taxpayer Obligation
Be honest and compliant
Disclose complete information
Be informed about tax rules and compliance requirements
Maintain accurate record and documentation
Rupee comes from (2022):
GST: 17%
Non-tax revenue: 6%
Customs: 4%
GST: 21%
Non-tax revenue: 8%
Customs: 4%
○ Universal / Targeted
○ Conditional / Unconditional
○ Implicit / Explicit
● Need for subsidy
○ Improved production/Promoting better inputs
○ Achieve social objective
○ Price control
○ Increasing efficiency
○ Export promotion
• Many of the states are ill-prepared, hence BAPU (Biometrically Authenticated Physical
Uptake) is a better option till the time banking coverage and mobile penetration
increases
Issues with DBT
• LPG-subsidized at 36% and the better off consume 91% of the LPG
• Electricity-better off are subsidized at a rate of 32% and poor at 49% but
better off consume 84% of the demand