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VOLUME I ISSUE VII

(DECEMBER 2020)

Email – editor@ijlra.com

Website – www.ijlra.com

INTERNATIONAL JOURNAL FOR LEGAL RESEARCH & ANALYSIS

(ISSN 2582 – 6433)

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Volume I Issue VII|December 2020 ISSN: 2582-6433

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DISCLAIMER

No part of this publication may be reproduced or copied in any form by any means

without prior written permission of Managing Editor of IJLRA. The views

expressed in this publication are purely personal opinions of the authors and do not

reflect the views of the Editorial Team of IJLRA.

Though every effort has been made to ensure that the information in Volume I

Issue VII is accurate and appropriately cited/referenced, neither the Editorial

Board nor IJLRA shall be held liable or responsible in any manner whatsever for

any consequences for any action taken by anyone on the basis of information in

the Journal.

Copyright © International Journal for Legal Research & Analysis

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EDITORIAL TEAM

EDITORS

Ms. Ezhiloviya S.P.

Nalsar Passout

Ms. Priya Singh

West Bengal National University of Juridical Science

Mr. Ritesh Kumar

Nalsar Passout

Mrs. Pooja Kothari

Practicing Advocate

Dr. Shweta Dhand

Assistant Professor

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ABOUT US

INTERNATIONAL JOURNAL FOR LEGAL RESEARCH & ANLAYSIS ISSN

2582-6433 is an Online Journal is Quarterly, Peer Review, Academic Journal,

Published online, that seeks to provide an interactive platform for the publication

of Short Articles, Long Articles, Book Review, Case Comments, Research Papers,

Essay in the field of Law & Multidisciplinary issue. Our aim is to upgrade the

level of interaction and discourse about contemporary issues of law. We are eager

to become a highly cited academic publication, through quality contributions from

students, academics, professionals from the industry, the bar and the bench.

INTERNATIONAL JOURNAL FOR LEGAL RESEARCH & ANALYSIS ISSN

2582-6433 welcomes contributions from all legal branches, as long as the work is

original, unpublished and is in consonance with the submission guidelines.

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AN EVALUATION OF THE EFFECT OF INDIRECT TAXATION IN

INDIA

(By Aaradhya Nagyan)

INDEX

Abstract

Introduction

Meaning of Indirect Tax

Features of Indirect Tax

Types of Indirect Tax

Impact of Indirect Tax on Indian Economy

Impact of GST on Indian Economy

Objectives

Merits of Indirect Tax

Demerits of Indirect Tax

Cases

Conclusion

Reference

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ABSTRACT

Introduction of GST was with the motive that GST is a single national constant tax levied

across India on all goods and services. In GST, all Indirect taxes such as excise duty, central

sales tax and value added tax etc. will be comprehended under a single regime. Establishment

of the Goods and Services Tax (GST) anticipated as a remarkable step towards a

comprehensive indirect tax ameliorate in the country, which would lead India for its

economic growth. The Proposed study is outlined to know the impact on GST on Indian

Economy with the assist of its discrete effect on different district and remove surge effect of

taxes and also to provide for a customary national market for goods and services. The Study

is investigational in nature.

Keywords- GST, Indirect tax, goods and services, cascading effect, economy.

INTRODUCTION

The word tax is derived from Latin word--

Taxare: “which means to estimate”

Tax is legally compulsory payment levied by the government on companies or person.

Taxes in modern economy are the most important source of government income.

Tax is the basic revenue for government that provides facilities/ public service.

Tax falls in all 3 list, i.e.: State, Union, Concurrent.

PURPOSE BEHIND TAXES:

1. Socio-economic benefits

2. To stop capitalization

3. To remove inequalities

4. To provide incentives for larger earnings and more savings.

CLASSIS OF TAXES:

1. Direct Tax

2. Indirect Tax

Direct Tax- are the primary taxes on an individual and are basically based on ability of

taxpayers. It includes Income Tax Act, 1961 and Income Tax Rule, 1961. Income tax is

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charged on residential basis not citizenship. Direct tax are those taxes which are known to

person.

Indirect Tax- includes Goods and Services Tax 2017, Value Added Taxes, imports and

exports, taxes on legal transactions and import duties. It is applied on substantial portion of

consumer expenditures.

INDIRECT TAXES

The indirect taxes are the taxes charged by the Central and State Government for the

expenditure, services, rights, privileges and consumptions. These are not applied on the

property or the income. Indirect taxes include duties of customs paid on imports, value added

tax, distribution of products, etc. all these are called as indirect tax because they are not

directly charged. Various State agencies tend to raise these taxes for generating higher

revenue.

Indirect tax is also called as consumption tax as it is a tax levied on consumption spending on

goods and services, sales tax, value-added tax.

India is one of the countries across the world that is following the VAT mode. White Paper

with basic design for VAT was introduced on January 17, 2005 by the Finance Minister P.

Chidambaram. VAT was introduced both at central and state level. It was been executed in

Haryana in 2003 and later on 1stApril 2005 it was introduced in other states as an Indirect

Tax in the Indian taxation system. VAT replaced central excise duty at the national level and

the sales tax system at the state level. Thus, this system/provision improved the indirect

taxation system of the country. Goods and Service tax bill ceremonially known as the body of

law (one hundred and twenty second amendment) bill, 2014 proposes a national value added

tax to be executed in India from June 2016. The GST application in India is Dual in nature,

i.e. it consists of two components: one levied by Centre (CGST) and another levied by States

and Union Territories (SGST). However, base of tax levy would be identical. Initially it was

prepared that there would be a national level Goods and Services tax. But as the make public

of first decision by the empowered/ committee of the state Finance Ministers on 10.11.2009,

it has been made certain that there would be a “Dual GST” in the country. Centre and state

both governments are entitled to charge taxes on the goods and service.

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FEATURES OF INDIRECT TAX

1. Nature- usually indirect taxes are regressive in nature but after GST is being

introduced indirect tax has become progressive.

2. Social Coverage- indirect tax has massive courage as it falls on every individual

buying goods/products and services.

3. Liability of Tax- the service providers make payment on indirect taxes which are

charged to final consumer.

4. Evasion- it is hard to avoid indirect taxes due to direct execution through goods and

service.

5. Payment and Tax Load- the service provider makes payment of the indirect taxes

which are charged by the client.

6. Investments and Savings- many indirect taxes are growth oriented as they demotivate

the consumer and uplifts savings.

TYPES OF INDIRECT TAXES

GOOD AND SERVICE TAX

It was introduced on July, 17 concluding 17 indirect taxes. All major service and services tax

have been carried under Goods and Service Tax.

At central level it is applied on- sales tax, octroi and entry, luxury tax, purchase tax, central

sales tax, entertainment tax, on lottery and betting, tax and levies on products outside GST

purviews products having alcohol and petroleum products.

At State Level it covers the following- state exercise duty, additional exercise duty,

countervailing duty, special additional custom duties and service tax.

NEWLY IMPLEMENTED INDIRECT TAX

GST is highly considered tax system of the country; it is the latest type of indirect tax which

is been operated under Constitution of India. Its importance is that it covers various and large

amount of indirect taxes which are been operated within country. It has bought a huge and

progressive change in economy of the country.

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VALUE ADDED TAX

Value Added Tax is cover by the State Government. When a client/consumer buys a product,

which is essential then he/she also pay an additional tax, and this tax is known as Value

Added Tax. VAT has a rate that is collected along nature of item/object.

SALES TAX

The tax charged on sales of goods. This tax is imposed by Union Government on the Inter

sales tax whereas the sale tax on Intra- State sale is levied by the State Government. Sales

Tax has three distinction along, which are- (i) Inter State Sale (ii) Sale during Import/Export

(iii) Intra State Sale.

SERVICE TAX

These are the indirect indices which taxpayers pay on various paid service; it includes:

architect, telephone, advertising, tour operator, interior decorator, health center, financial and

banking service, maintenance service, consultancy service and event management.

CONSUMER DUTY TAX

Tax upon goods imported into the country from abroad, which is been paid at the entry port

of a country such as airport, seaside. The rate of rate depends upon the nature of the product.

Octroi is levied on goods entering a municipal zone.

EXCISE DUTY

It is as type of tax that is been charged on goods that are produced outside country. It is also

called as Central Value Added Tax.

ANTI-DUMPING DUTY

This tax is charged upon on products that are exported at a rate less than the standard rate by

the nation to the other nation. The tax is charged by the Central Government.

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IMPACT OF INDIRECT TAX ON INDIAN ECONOMY

The burden of indirect taxes directly falls on consumers and it directly impacts the cost of

goods and services. Indirect taxes increase the efficiency of the producers, to maintain

demand the producers have to put their full efforts on cost measures. Therefore, this effort of

producers brings up proper utilization of resources in the economy. The clients are free to buy

products at their choice and at this point healthy competition grows up in the economy.

Indirect taxes have positive impact on the growth of Indian Economy.

IMPACT OF GST ON INDIAN ECONOMY

Goods and Service Tax(GST) a type of indirect tax which was introduced on July, 17.

Objective of GST is to bring uniformity in taxes of the country. After dissolving several

irrelevant taxes, GST was implied. GST helped in reducing the confusing among people

about different taxes in different states on goods. In modern period consumer’s awareness has

increased as compared to previous era. GST has also replaced many local taxes of the state

and central in India. It is based on tax being opposed to the production-based tax in previous

era. The system has become easier as it also works on electronic.

GST is the biggest tax reform founded on notion: “one nation, one market, one state”. It is the

single biggest Indirect Tax. The idea behind introducing GST across the country in 29 states

and 7 union territories is that it would offer win-win situation for every individual and would

have fair dealings. Manufacture and traders have more relief through GST as on tax filing,

easy book keeping, consumers and transparent rules would be pay less for goods and services.

OBJECTIVES

1. Increase in Standard of living of people.

2. Increase in efficiency of production.

3. Better utilization of resources.

4. Growth of healthy competition in the market.

5. More freedom of choice to the consumers

6. Increase in demand of luxury life.

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MERITS OF INDIRECT TAXES

1. Indirect taxes if properly administrated, the chance of tax evasion becomes less.

2. Indirectly taxes are usually hidden in the price of goods and therefore their presence is

not felt much.

3. Indirect taxes are like powerful tool for the production and investment things for the

growth in economy.

DEMERITS OF INDIRECT TAXES

1. Indirect tax as principle of ability to pay but is unjust to the poor. Purchase of revenue

is also collected by the poor which makes these taxes regressive in effect.

2. If Indirect taxes are heavily imposed on luxury items then taxing the luxuries alone

will not yield adequate revenue for the state.

3. Direct taxes take away the purchasing power of the taxpayer and that effect on reduce

in demand and price. Whereas, Indirect tax are added to sale price of taxed goods

without touching the purchasing power. This results in case where inflationary forces

are fed through higher prices, costs and wages.

CASES ON INDIRECT TAX

Bharat Raj Punj V. Commissioner of Central Goods and Service Tax (Rajasthan

High Court)

Case: Input tax credit availed fraudulently by issue of fake or fictitious sale invoices.

Decision: Arrested senior officer/ officer holders of the company after taking down their

statements. Also, Rajasthan High Court let go the Writ petition of the petitioner and inflict a

cost of Rs. 1,00,000/- only.

Comments: It is an unlawful act that is committed under Section 132 of the Act. It precisely

covers cases prime to wrongful availment of Input tax credit. The Department has the

potential to issue warrants or arrest the offender on reasonable grounds, without first

determining the tax.

Vikas Goel and another V. Central Goods and Services Tax Commissionerate

(Punjab and Haryana High Court)

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Case: Bogus billing under GST.

Decision: Arrested the appellant and refuse their bail in GST fraud.

Comments: Petitioners made fraud/false bills and modify the amount without any actual

transportation or sale of goods. Transactions appeared only on paper. On searching, it was

found that assertion were closed for a term of 5 years and there was tax evasion.

So, the Department has the power/strength to arrest under Section 69 of the Act.

M/s. Jeyyam Global Foods (P) Ltd. Vs Union of India (Madras High Court)

Case: Detention of goods/stock cannot be extended beyond a reasonable term of time.

Decision: It is not allowed to inspect squad officers to detain goods further on a reasonable

period of time and take action against it.

Comments: Inspecting Squad officer arose an object/issue of wrong classification of goods,

issued a detention notice and levied tax and penalty.

Squad officer can only detain the goods for the purpose of preparing applicable papers

regarding any issue involved like wrong classification of goods, and handover the papers to

the jurisdictional assessing officer. The final judgment or decision can only be taken by the

jurisdictional assessing officer.

Tvl. R K Motors V. State Tax Officer (Madras High Court)

Case: Powers granted on a statutory jurisdiction should be exercised in a reasonable manner.

Decision: Directed the authority to liberate the vehicle and goods detained.

Comments: Authority hold up the vehicle seized the products when driver is on the way the

vehicle to some other place instead of the place of delivery. Also, query for a huge sanction

for release of vehicle.

Since the tax in regard of goods had already been paid and transportation was duly covered

by proper documentation, authority is wrong in taking such harsh steps. As an alternative the

authority should have questioned the driver to reroute the vehicle to the place of delivery.

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CONCLUSION

Government performs many functions in the discharge of duties, for fulfilling the

requirements they require capital. So, government collects money from the public in the form

of taxes, fines, etc. In our country tax is the most important source of revenue. The income

earned by the public is called public revenue which is further used for the requirements of

public. Both direct and indirect taxes are important for our country as they both together

perform good growth in economy.

GST provides relief to producers and consumers by providing wide and comprehensive

coverage of input tax credit set-off, service tax set off and subsuming the several taxes.

Efficient articulation of GST that leads to resource and revenue gain for both Centre and

States majorly through widening of tax base and improvement in tax compliance. Further it

can be concluded that GST have a positive and good impact on various sectors and industry.

Although execution of GST requires concentrated efforts of all stake holders namely, Central

and State Government, trade and industry. Necessary steps should be taken. Thus, Indirect

Taxes have healthy impact on Indian Economy.

REFERENCES

1. Bird, Richard M. (2012). The GST/HST: Creating an integrated Sales Tax in a

Federal Country. The School of Public Policy, SPP Research Papers, 5(12), 1-38 2.

2. Indirect Taxes Committee, Institute of Chartered Accountants of India (ICAI) (2015).

Goods and Service Tax (GST). Retrieved from: http://idtc.icai.org/download/Final-

PPT-on-GST-ICAI.pdf 5.

3. The economic Times (2009)

4. GST India (2017)

VARIOUS WEBSITES:

1. www.wikipedia.com

2. www.google.com

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