DIRECT TAX & CENTRAL SALES TAX

Submitted by:
TANIYA BAKSHI
MBA - Ist Sem

Submitted to: Prof. Sunil Bhardwaj

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Direct tax is the tax which is charged directly on the tax payer. For e.g. property tax and income tax. In other words direct tax is that tax which is deducted from one's salary. Government levies on the income, property, or wealth of people or companies. A direct tax is borne entirely by the entity that pays it, and cannot be passed on to another entity. Examples include corporation tax, income tax, and social security contributions. Unlike indirect taxes, direct taxes are based on the ability to pay principle but they sometimes work as a disincentive to work harder and earn more because that would mean paying more tax.
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Direct taxation in India is taken care by the Central Board of Direct Taxes (CBDT); it is a division of Department of Revenue under the Ministry of Finance. CBDT is governed by the Revenue Act 1963. It is given the authority to create and control direct taxes in India. The most important function of CBDT is to manage direct tax law followed by Income Tax department.

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In India the tax structure is divided amongst the central government and state government. The central government levies taxes on income, custom duties, central excise and service tax. While the state government levies tax like state excise, stamp duty, VAT (Value Added Tax), land revenue and professional tax.

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Government of India has proposed a new Direct Tax code or Direct Taxes Code to replace the old Indian Income Tax Act of 1961. This Direct Tax code is an attempt to simplify the tax-life of an individual. The way it works is that the income tax slabs are increased, however several deductions (e.g. deduction on housing loan) and tax-breaks are taken away. A detailed post will be written about Direct Tax Code. Below you will find the proposed income tax slabs under the Direct Tax code will be debated in the Parliament and if approved, will be implemented in 2011-2012.
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MEN INCOME INCOME INCOME INCOME up to 1.6 lacs 1.6 lacs to 10 lacs 10 lack to 25 lacs above 25 lacs

WOMEN up to 1.9 lacs 1.9 lacs to 10 lacs 10 lacs to 25 lacs above 25 lacs

SENIOR CITIZEN Up to 2.4 lacs 2.4 lacs to 10 lacs 10 lacs to 25 lacs above 25 lacs

TAX no income tax 10% 20% 30%

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According to the article 265 of the constitution of India no tax of any nature can be levied or collected by the central or State Governments except by the authority of law. The constitution of India vide entry no. 54 of the state list, gave power to the state legislature to levy sales tax on sale or purchase of goods other than newspapers, which takes place within the state. However, at that time the parliament was not empowered to levy any type of sales tax. Therefore, only state legislature enacted state sales tax laws in their respective state for levy of sales tax on sale or purchase of goods other than newspapers.

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Although, the State Government was empowered to levy and collect tax on sales made within its own territory but there was no specific provisions of levying tax on sale and purchase having interstate composition. As a result, same goods came to be taxed by several states on the ground that one or more ingredient of sale was present in their state. This led to multiple leving of tax. Therefore central sales tax Act 1956 was enacted by the Parliament and received the assent of the president on 21.12.1956. Imposition of tax became effective from 01.07.1957.
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1.It extends to the whole of India. 2. Every dealer who makes an inter-state sale must be a registered dealer and a certificate of registration has to be displayed at all places of his business. 3 .There is no exemption limit of turnover for the levy of central sales tax. 4. Under this act, the goods have been classified as: Declared goods or goods of special importance in interstate trade or commerce and

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 Other goods. The rates of tax on declared goods are lower as compared to the rate of tax on goods in the second category. 5 .The tax is levied under this act by the Central Government but, it is Collected by that state government from where the goods were sold. The tax thus collected is given to the same state government which collected the tax. In case of Union Territories the tax collected is deposited in the consolidated fund of India
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Formulate principles for determining when a sale or purchase of goods takes place :in the course of interstate trade or commerce ; or outside a State ; or in the course of import into or export from India. 2. Provide for the :levy of collection and distribution Of taxes on sales of goods in the course of interstate trade or commerce.
1.

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3.

Declare certain goods to be of special importance of inter state trade or commerce. 4. Specify the restriction and conditions to which state laws impose taxes on the sale or purchase of such goods of special importance shall be subject. 5. Provides for collection of tax in the event of liquidation of a company. 6. Authority to settle disputes in course of interstate trade or commerce

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Present CST Rate in India is 2% State from which movement of goods commences gets the revenue. Even if CST is levied by Union Government, the revenue goes to the State Government as CST Act is administered by the State givernment

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THANKYOU .
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