History of Taxation System in India-
“Tax assessment is a compulsory and vital commitment, imposed by the public authority from citizen without direct advantage however for common advantage of individuals, and expenses ought to be masterminded by the law”. – Kaushiki Keshari
Introduction
Taxes are compulsory charges required on people or companies and authorized by an administration substance whether nearby, territorial or public in order to fund government exercises. In financial matters, charges fall on whoever pays the weight of the assessment, regardless of whether this is the substance being burdened, like a business, or the end buyers of the business’ merchandise. Duty is utilized to support public administrations, pay government commitments, and give merchandise to residents. Thusly The Government needs to play out a few capacities for the government assistance of the general public in the country it covers social goals, monetary development and security in the country.
Tax System of British:
The legal system of British in India reflected characteristics of a standard agriculture economy. Revenues of the central government were dominated by custom duties as domestic requirements were met mostly from imports, chiefly from Britain and other commonwealth countries. Import duties were levied on all most all items of imports whereas major items subject to export duties were jute and tea during which India enjoyed near monopoly within the world market. Various custom and tariff enactments were passed from time to time.
Origin of Tax System in India
History of tax collection in India[1] was winning since the time of Maurya Dynasty. The residents who have a place with exclusive class contributed 1/sixth of their pay Before Mauryas charge was likewise referenced noticeable sources known as Manusmrti and later in Arthshastra. The Manusmrti is the antiquated and predominant kind of revenue charge arrangements. Manusmrti underlined the essential inconvenience and guideline of annual expense regarding the matters. According to it, the tax collection ought not be a throbbing encounter for the subjects. The tax assessment ought to be correct sufficient that it ought to satisfy a sensible income focus just as feels advocated to the majority.
The Income Tax arrangements as endorsed by the Manusmrti are as per the following; Traders to pay 20% of Income, Artisans to pay 20% of Income, Agriculturists were needed to pay1/6, 1/8, or 1/10 of the worth of absolute creation. The rates fluctuate as per the conditions impacting crop creation. Also, the dealers and crafts mans were needed to pay Income charge as gold or silver. The Arthshastra is another real source of taxation laws and provisions in India. The Arthshastra are often considered because the first Indian text addressing public finance, financial administration, and monetary laws during a structured manner. The book was written by Kautilya in around 2300 BC[2]. it’s credited to possess a huge impact on the event of the tax system in India.
Kautilya coded the taxation system consistent with the principle of “maximum welfare to the society.” The text focused on establishing an outlined taxation code. The policies, tax slabs, and responsibility of tax collectors were pre-determined within the book. Moreover, the schedule of every payment, due dates of payment, quantity, and type of commodities accepted were all encoded. Not just this, the book also mentions the taxation for export & import of products, toll taxes, etc. The tax provisions as prescribed by the Arthshastra are as follows; Agriculturists were required to pay 1/6 of produce as a flat rate for land taxation The affluent were required to pay higher taxes, and fewer privileged were imposed with lower taxes Rule of the book with limited flexibility to tax collectors.
In India, tax was introduced in 1860 at that point this tax was imposed by Sir Wilson during British rule for the primary time. After Independence the govt found out time to time various Committees and Commissions to scale back complications of Income -tax Act. Income-tax Act, 1961, came into force with effect from1st April, 1962. This act applies to whole India and currently enforced within the country.
Constitutional Validity of Tax
The Constitution of India provides for the important articles relating to the taxation. Article 265 to Article 289[3] implies with the constitutional provisions concerning to taxation. The law clearly states for imposition of tax must be a valid law that it should not be prohibited by any provisions of the constitution.
- Article 265[4] is applicable not only for “levy” but also for the collection of taxes and the expression “assessment” within its compass covers both the aspects carried out by the executive functionary.[5]
- Article 268 – duties levied by union but collected and appropriated by states. Example: stamps duties mentioned in union list shall be levied by central government but collected by the state .
- Article 269 deals with taxes levied and collected by the union and assigned to the states that is money collected will not go to the consolidated fund but used and distributed among state in accordance with principle formulated by the parliament.
- Article 270 deals with the tax levied and collected by the state example: taxes and duties referred in the union list shall be distributed.
While preparing any law regarding taxation it should be within the legislation competence should not be prohibited by any constitutional provisions like Article 27, 276, 286 and 301. Does not violate any fundamental rights and constitutional limitation.[6]
Restriction on the state taxing power
The state has like the union, power to levy tax on supply of goods or services or both other than of newspapers. Article 286 however imposes
the following restrictions on the states power to impose sales tax on goods.
Sale or Purchase of Goods Which Take Place outside the State: Article 286 (1) (a) prohibits a state to impose a tax on the supply of goods or services or both which take place outside the state. Sale Or Purchase of Goods In The Course of Import And Export Article 286(1)(b) prohibits state to impose tax in the course of import of goods and services or export of goods and services out of the territory of India In the case of State Of Orissa v/s MMTC export of sale become complete only after reaching the destination. Article 287 prohibits state from imposing tax on consumption or sale of electricity supplied to government utilized for constructions, maintenance of railway.
Power of Union to charge tax – Article 271 provides that if parliament at any time increases any of the duties or taxes mentioned in Article 269 and 270 except Article 246A by imposing a surcharge.
Good tax Structure in the Country
Tax is imposed for the common good of the society without regard to benefit to special individual. For good tax system inside the country it is must to create equity on ability to pay the tax amount, people should know there certain liability, Governments should try to charge taxes in convenience to tax payer and the legislature should be flexible while making policies so that it can suit the economic condition of the country. There are many theories and opinion of people on taxes however Adam Smith’s ordinances of tax assessment are broadly acknowledged in the country. It gives right premise to judge charges and these standards are as yet common in the general public These guideline stayed unaltered from most recent 220 years. Fundamentally Adam Smith[7] has examined Four kinds of ordinances of tax assessment:- (I) Canon of Equality (ii) Canon of certainty, (iii) Canon of economy, (iv) Canon of convenience.
- Canon of Equality: Canon of equity expresses that the weight of tax assessment should be appropriated similarly or fairly among the citizens. Notwithstanding, this kind of correspondence denies of equity the specific justification for conditions isn’t all citizens have a similar capacity to settle charges. Rich individuals are fit for paying more assessments than destitute individuals. Hence, equity requests that an individual having more noteworthy capacity to pay should make good on enormous duties.
- Canon of Certainty: The expense which an individual needs to pay ought to be sure and not discretionary. As per A. Smith, the hour of instalment, the way of instalment, the amount to be paid, i.e., charge risk, should all things considered and plain to the supporter and to everybody. In this way, ordinance of sureness accepts a great deal of things. It should be sure to the citizen just as to the duty requiring authority.
- Canon of Economy: This ordinance infers that the expense of gathering an assessment ought to be just about as most minimal as could be expected. Any expense that includes high managerial expense and uncommon deferral in evaluation and high assortment of assessments ought to be stayed away from through and through.
- Canon of Convenience: Taxes ought to be exacted and gathered in such a way that it gives the best comfort not exclusively to the citizen yet in addition to the public authority. Subsequently, it ought to be effortless and inconvenience free similarly as practicable.
Conclusion
With the development of time and economic science, Taxation has gradually become crucial tool of usage with more than one goal and become important source of revenue of the country. Many changes have been implemented in both qualitative and quantitative changes in the public expenditure the objectives and characteristic have also changed from ancient time to modern development so the tax system has evolved with the evolution of the function of the modern state. Tax is imposed by law In order to bring good taxation system in the country we need to ensure tax is paid mandatory to the government because it is levied for the common good of the society and the government should also keep in mind the legislature competence while imposing tax from the citizen.
[1] https://www.incometaxindia.gov.in/pages/about-us/history-of-direct-taxation.aspx
[2] https://www.jstor.org/stable/41856583
[3] Dr. J.N. Pandey’s Constitutional law of India
[4] Article 265,268,269,270 of Constitution of India
[5] Chhota bhai v/s Union Of India AIR 1952
[6] S. Gopalan vs State of Madras (1958) 2 MLJ 117
[7] http://www.mgcub.ac.in/pdf/material/2020040407175693bf2c4302.pdf
Author: Kaushiki keshari,
STUDENT