Taxation System
1. Introduction
- Tax: Compulsory financial charge imposed by Government to fund public expenditure.
- Article 265 of the Indian Constitution: “No tax shall be levied or collected except by authority of law.”
- Tax-to-GDP ratio of India (2023-24 RE): 11.1 % (OECD avg. ≈ 34 %).
2. Classification of Taxes
| Type | Nature | Examples | Collection Level |
|---|---|---|---|
| Direct | Paid by person on whom levied | Income-tax, Wealth-tax (abolished 2015), Corporation tax | Central |
| Indirect | Burden shifted to consumer | GST, Customs, Excise (now subsumed) | Central + State |
| Progressive | Rate rises with income | Income-tax slabs | – |
| Regressive | Rate falls with income | Indirect taxes (in general) | – |
3. Constitutional & Institutional Framework
| Entry | List | Subject |
|---|---|---|
| 82 | Union List | Corporation tax, Income-tax (non-agri) |
| 46 | State List | Excise on liquor, VAT on petrol |
| 279A | Constitution | GST Council (Constitutional body w.e.f. 1-7-2017) |
| 280 | Constitution | Finance Commission every 5 years |
Key bodies
- CBDT (Central Board of Direct Taxes) – 1963, under Revenue Dept., MoF
- CBIC (Central Board of Indirect Taxes & Customs) – 2018 (re-named from CBEC)
- GSTN – Goods & Services Tax Network (IT backbone; 24.4 % GoI stake)
4. Milestones & Important Dates
| Date | Event |
|---|---|
| 1860 | 1st Income-tax introduced by Sir James Wilson (Post-1857 revolt) |
| 1886 | Income-tax Act passed |
| 1-4-1962 | Current Income-tax Act comes into force |
| 1-4-1997 | Service tax born @ 5 % (now subsumed in GST) |
| 1-4-2005 | VAT replaces sales-tax in States |
| 1-7-2017 | GST launched (mid-night Parliament session) |
| 1-2-2023 | New income-tax regime becomes default (6-slabs, no 80C) |
| 30-6-2023 | 50-cr GST returns filed milestone |
| 1-1-2024 | 100-th GST Council meeting held |
5. Direct Taxes at a Glance
| Tax | FY 2024-25 (BE) ` Cr | % of total tax |
|---|---|---|
| Corporation tax | 9,22,675 | 28.4 |
| Income-tax (Personal) | 10,37,205 | 31.9 |
| Securities Transaction Tax (STT) | 25,000 | 0.8 |
| Total Direct | 19,97,880 | 60.3 |
Highest personal tax rate – 30 % + 37 % surcharge (if income > ₹5 cr) ⇒ effective 42.74 % (highest in Asia).
6. Indirect Taxes after GST
GST structure
| Slab | Key goods |
|---|---|
| 0 % | Food-grains, milk, metro ride |
| 5 % | Rail tickets, tea, spices |
| 12 % | Phones, butter, juices |
| 18 % | Standard rate (most items) |
| 28 % | Luxury cars, tobacco + cess |
GST Revenue (FY 23-24) – ₹20.18 lakh crore (monthly record ₹2.1 lakh cr in Apr-24).
Other indirect taxes
- Basic Customs Duty (BCD) – FY 24-25 target ₹2.05 lakh cr
- Compensation cess – earmarked for States till 2026 (extended)
7. Rail-specific Tax Facts
- Railways exempted from GST on passenger fare; instead bear service tax (now integrated GST @ 5 % on AC class only).
- Indian Railways Finance Corporation (IRFC) enjoys 100 % tax holiday under section 80-IA for infrastructure (till 31-3-2024).
- Freight rebate: 5 % freight concession given by Railways if GST @ 12 % paid (to offset inverted duty).
8. Quick-Reference Tables
A. Income-tax Slabs (New Regime FY 2024-25)
| Income (`) | Rate |
|---|---|
| 0-3 lakh | Nil |
| 3-6 lakh | 5 % |
| 6-9 lakh | 10 % |
| 9-12 lakh | 15 % |
| 12-15 lakh | 20 % |
| >15 lakh | 30 % |
B. Corporate Tax Rate
| Turnover | FY 2023-24 | Note |
|---|---|---|
| < ₹400 cr | 25 % | MAT 15 % |
| New manufacturing | 15 % | Sec 115BAB (set up till 31-3-2024) |
C. GST Council Quorum
| Vote share | |
|---|---|
| Centre | 1/3 |
| States together | 2/3 |
| Decision | 75 % majority |
9. One-liner Revision Bullets
- Income-tax Day – 24 July (since 1860).
- PAN – 10-digit alphanumeric; 5th character is surname of individual.
- TDS – max deposit time 30 April for March month.
- GSTIN – 15-digit; first 2 = State code.
- E-Way bill must if goods > ₹50,000 (inter-state).
- Customs duty governed by Customs Act 1962 & Tariff Act 1975.
- Krishi Kalyan Cess & Swachh Bharat Cess subsumed into GST.
- Faceless Assessment scheme launched 2019 to endInspector Raj.
- Vivad se Vishwas Scheme 2020 – for direct-tax disputes.
- Samadhan portal – for GST grievance redressal.
10. Practice MCQs
Who introduced the first Income-tax in India?
a) Lord Ripon b) Sir James Wilson c) Lord Mayo d) James MillWhich Constitutional amendment created the GST Council?
a) 100th b) 101st c) 102nd d) 103rdThe highest GST slab is
a) 28 % b) 30 % c) 32 % d) 35 %Which tax was abolished w.e.f. AY 2016-17?
a) Wealth-tax b) Gift-tax c) Estate-duty d) VATWhat is the effective peak personal income-tax rate (incl. surcharge) for income > ₹5 cr?
a) 30 % b) 36 % c) 42.74 % d) 39 %The GST Network (GSTN) is classified as
a) Govt. company b) Private company c) Special-purpose PPP d) Statutory bodyWhich of the following is NOT subsumed under GST?
a) Service-tax b) VAT c) Basic Customs Duty d) Entertainment-taxPAN is mandatory for transactions above
a) ₹1 lakh b) ₹2 lakh c) ₹50,000 d) ₹5 lakhMAT rate under section 115JB is
a) 15 % b) 18.5 % c) 21 % d) 25 %The 50th GST Council meeting (2023) was held in
a) New Delhi b) Mumbai c) Lucknow d) BengaluruWhich Finance Commission recommended 41 % devolution to States?
a) 13th b) 14th c) 15th d) 12thCustoms duty collection target FY 24-25 (BE) is approx.
a) ₹1 lakh cr b) ₹1.5 lakh cr c) ₹2.05 lakh cr d) ₹3 lakh crThe default tax regime for individuals from FY 23-24 is
a) Old regime b) New regime c) Presumptive d) AlternateGST compensation cess to States is scheduled to end in
a) 2025 b) 2026 c) 2027 d) Already endedWhich State first implemented VAT in 2005?
a) Maharashtra b) Haryana c) Karnataka d) Tamil NaduThe maximum TDS on rail ticket cash payment exceeding ₹50,000 is
a) 1 % b) 5 % c) 10 % d) 20 %The STT rate on delivery equity is
a) 0.1 % buyer b) 0.1 % seller c) 0.025 % seller d) 0.01 % buyerWhich article provides for Finance Commission?
a) 280 b) 281 c) 282 d) 283The minimum alternate tax (MAT) is levied on
a) Individuals b) HUF c) Companies d) PartnershipsGST day is celebrated on
a) 1 May b) 1 Jun c) 1 Jul d) 1 Aug
Show Answers
1-b, 2-b, 3-a, 4-a, 5-c, 6-c, 7-c, 8-b, 9-b, 10-a, 11-c, 12-c, 13-b, 14-b, 15-b, 16-a, 17-b, 18-a, 19-c, 20-cTip: Revise tables and one-liners daily; correlate rail exemptions under GST for maximum score in Railway GK sections.
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