What is Tax? Major milestones in Indirect Tax reform : - GST In India

Monday, 20 March 2017

What is Tax? Major milestones in Indirect Tax reform :

What is Tax?

The word tax is derived from the Latin word ‘taxare’ meaning to estimate. A tax is not a
voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative
authority" and is any contribution imposed by government whether under the name of toll,
tribute, impost, duty, custom, excise, subsidy, aid, supply, or other name.”

1.  The first known system of taxation was in Ancient Egypt around 3000 BC -2800 BC in the first dynasty of the Old Kingdom. Records from that time show that the pharaoh would conduct a biennial tour of the kingdom, collecting tax revenues from the people. Otherrecords are granary receipts on limestone flakes and papyrus. Early taxation is also described in the Bible. In Genesis

2.  it states "But when the crop comes in, gives a fifth of it to Pharaoh. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children." Joseph was telling the people of Egypt how to divide their crop,providing a portion to the Pharaoh. A share

3.  of the crop was the tax. In India, the tradition of taxation has been in force from ancient times. Itfinds its references in many ancient books like 'Manu Smriti '

4.  and 'Arthasastra'. The Islamic rulers imposed jizya

5. It was later on abolishedby Akbar. However, Aurangzeb, the last prominent Mughal Emperor, levied jizya on his mostly Hindu subjects in 1679. Reasons for this are cited to be financial stringency and personal inclination on the part of the emperor, and apetition by the ulema

6. The period of British rule in India witnessed some remarkable change in the whole taxation system of India. Although, itwas highly in favour of the British government and its exchequer but it incorporated modern and scientific method of taxation tools and systems. In 1922,

7. The country witnessed a paradigm shift in the overall Indian taxation system. Setting up of administrative system andtaxation system was first done by the Britishers. Broadly, there are two types of Taxes viz. Direct7and Indirect taxes

8. Taxes in India are levied by the Central Government and the State Governments. Some minor taxes are also levied by the local authorities such as Municipality or Local Council. The authority to levy tax is derived from the Constitution of India which allocates the power to levy various taxes between Centre and State.

Major milestones in Indirect Tax reform :

1974 Report of LK Jha Committee suggested VAT.

1986 Introduction of a restricted VAT called MODVAT.
1991 Report of the Chelliah Committee recommends VAT/GST and recommendations accepted by Government.

1994 Introduction of Service Tax.

1999 Formation of Empowered Committee on State VAT.

2000 Implementation of uniform floor Sales tax rates Abolition of tax related incentives granted by States 2003 VAT mplemented in Haryana in April 2003 2004 Significant progress towards CENVAT2005-06 VAT implemented in 26 more states 2007 First GST stuffy released By Mr. P. Shome in January 2007 F.M. Announces for GST in budget Speech 2007 CST phase out starts in April 2007 2007 Joint Working Group formed and report submitted 2008 EC finalises the view on GST structure in April 2008