To tax is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity )by a state or the

functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many sub-national entities Taxes consist of direct tax or indirect tax and may be paid in money or as its equivalent A tax may be defined as a "pecuniary burden laid upon individuals or property owners to support the government A payment exacted by legislative authority. A tax "is not a voluntary payment or donation, but an enforced contribution A contribution imposed by government whether under the name of toll, tribute, impost, duty, custom, excise, subsidy, aid, supply, or other name Why Should I Pay Tax? Revenue- To raise money Redistribution- To transfer wealth Re-pricing-To address externalities- (Tobacco) Representation-Rulers tax citizens, and citizens demand accountability from their rulers as the other part of this bargain What is Income Tax? The major tax enactment in India is the Income Tax Act of 1961 passed by the Parliament which imposes a tax on income of individuals and corporations This Act imposes a tax on income under the following five heads Income from Salaries Income from House Property Income from Business or Profession Capital Gains Income from Other Sources Value Added Tax- VAT A value added tax (VAT) is a form of consumption tax It is a tax on the "value added" to a product or material, from an accounting view, at each stage of its manufacture or distribution The "value added" to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by

the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products from another business. o MODVAT o The Central Government introduced modified value added tax called MODVAT o This enabled manufacturers to avail credit of excise duty paid on the inputs used in or in relation to manufacture of the end product o It is a scheme for allowing relief to the final manufacturers on the excise duty borne by their suppliers in respect of goods manufactured by them o o CENVAT o The Finance Act 2000 introduced Central Value Added Tax replacing MODVAT from 1.4.2000 o CENVAT is basically an input duty relief scheme under Central Excise designed to reimburse the user manufacturer with the duty paid on the input which has absorbed as a part of purchase price when buying the same for producing finished products o o Scope & Coverage of CENVAT o The CENVAT scheme covers all inputs except high speed diesel oil and motor spirit o CENVAT credit also covers the inputs used in the manufacture of capital goods used captively o o Features of CENVAT Scheme o CENVAT covers all inputs and capital goods o It covers all finished goods, except matches and duty-free goods o CENVAT credit is available immediately on receipt of inputs/capital goods in factory o CENVAT credit is allowable even when goods are cleared for job work o Maintenance of separate records for dutiable and exempt goods o o Service Tax o It is levied and collected by the Central Government and shared with Sate Government

o A service tax is in the nature of charge for services like electricity, water, telephones, telex, insurance, banking, financial services and procurement of tickets for travel o The tax burden is ultimately shifted to the service consumers o o Service Tax- An insight o Service tax was introduced through Chapter V of the Finance Act, 1994 and in the beginning it was levied only on three services- Telephone, Insurance & Stock Broking o There is no separate enactment for service tax and no separate department for the administration of service tax o The tax is administered by the Central Excise Department o o o o o o o Administrative Mechanism Ministry of Finance Department of Revenue Central Board of Excise & Customs Central Excise Zones headed by Chief Commissioner Central Excise Commissionerates headed by Chief Commissioners Director General of Service Tax (Coordinator between ( c ) & ( e )

o Functions of Directorate of Service Tax o It monitors the collection & assessment of service tax o It compiles the service tax revenue reports received from various Central Excise Commissionerates o It scrutinizes the correspondence received from service providers and replies to the clarifications sought for o o Registration o Persons requiring registration o Service Provider who are providing the services are liable to pay service tax in majority of cases o Specified persons become liable to pay service tax in certain cases o o Service Tax Code Number- STC o STC is a 15 digit alpha-numeric code obtained by the service provider on an application made to Jurisdictional Superintendent of the Central Excise o It will be allotted within 3 working days from the date of application

o It is mandatory to quote the STC number on all documents relating to service tax o In respect of e-filing of service tax returns, STC number is referred to as STP Code without which e-filing is not possible o o o o Fringe Benefit Tax o o Fringe Benefits Tax (FBT) was the tax applied to most, although not all, fringe benefits. o A new tax was imposed on employers by India's Finance Act 2005 was introduced for the financial year commencing April 1, 2005. o The Fringe Benefit Tax is abolished in the Finance Bill of 2009 by Finance Minister Pranab Mukherjee. o The following items were covered: o Employer's expenses on entertainment, travel, employee welfare and accommodation. The definition of fringe benefits that have become taxable has been significantly extended. The law provides an exact list of taxable items. o Employer's provision of employee transportation to work or a cash allowances for this purpose. o Employer's contributions to an approved retirement plan (called a superannuation fund). o Employee stock option plans (ESOPs) have also been brought under Fringe Benefits Tax from the fiscal year 2007-08. o