Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994. The salient features of levy of service tax are: 1. Scope: It is leviable on taxable services ‘provided’ or ‘to be provided’ by a service provider. The services ‘to be provided’ in future are taxed only if payment in its respect is received in advance. Two separate persons required Payment to employees not covered: For charge of service tax, it is necessary that the service provider and service recipient should be two separate persons acting on ‘principal to principal basis’. Services provided by an employee to his employer are not covered service tax and, therefore, salaries or allowances paid to them cannot be charged to service tax. Continue reading
Business Taxation
Features of Goods and Services Tax (GST)
Goods and Services Tax (GST) is consumption tax that charged the buyers to pay for a wide range of domestic & international products, goods and services. In some countries it is also called Value Added Tax. It is a multi-stage tax on domestic consumption levied on taxable supplies of goods and services. GST imposed on every level of a product from raw materials all the way to finished goods. Consumers still need to pay income tax as GST and income tax is totally different. It is a consumption tax charged on imports items and also value added to goods and services provided by a business to the end user. Goods And Services Tax will be borne by the end-user or consumer and is not intended to add burden to businesses. Benefits of Goods and Services Tax (GST) Eliminates cascading effects Goods and Services Tax (GST) also enable the minimization of Continue reading
Introduction to Service Tax
Service tax is a tax on service. This is not tax on profession, trade. Calling or employment but is in respect of service rendered. If there is no service, there is no tax. As per Webster’s Concise Dictionary ‘service’ means a useful result or product of labor, which is not a tangible commodity. Thus basically service is a value addition that can be perceived but cannot be seen, as it’s tangible. However, usage of some goods during the course of rendering the service would not mean that there is no ‘service’. It is the predominant factor in each case, which is to be studied to arrive at a conclusion. Service tax is a tax levied on service providers in India, except the State of Jammu and Kashmir. Service Tax, introduced from the financial year 1994-95 now covers as many as 41 services within its ambit. Service sector, which has an Continue reading
Primary Purpose of Taxation
Taxation is a means by which governments finance their expenditure by imposing charges on citizens and corporate entities. The main purpose of taxation is to accumulate funds for the functioning of the government machineries. All governments in the world cannot run its administrative office without funds and it has no such system incorporated in itself to generate profit from its functioning. In other words, a government can run its administrative set up only through public funding which is collected in the form of tax. Therefore, it can be well understood that the purpose of taxation is very simple and obvious for proper functioning of a state. Taxes are charges levied against a citizen’s personal income or on property or for some specified activity. As such, one purpose of taxation is to increase in effectiveness and productivity of the nation as government is able to implement various socio-economic development projects such Continue reading
Objectives of International Taxation
The main objectives of International Taxation are the Neutrality and Equity. Tax Neutrality A neutral tax is one that would not influence any aspect of the investment decision such as the location of the investment or the nationality or the investor. The basis justification for tax neutrality is economy efficiency. World welfare will be increase if capital is free to move from countries were the rate of return is low to those where it is high. Therefore, if the tax system distorts the after-tax profitability between two investments or between two investor leading to a different set of investments being undertaken, then gross world product will be reduced. Tax neutrality can be separated into domestic and foreign neutrality. Domestic neutrality is an compasses the equal treatment of any citizen investing at home and citizen investing abroad. The key issues to consider here are whether the marginal tax burden is equalized Continue reading
Modern Principles of Taxation
The analysis of classical theories allows the formulation of principles that represent the qualities and tendencies of the modern taxation system. The modern principles of taxation are: The rational combination of direct and indirect taxes, which implies the utilization of various types of taxes, taking into consideration both the wealth and the income of the taxpayer. In periods of economic crisis it is better to have many sources of budget revenue with a relatively low rate and a large taxation basis then to have 1-2 types of income with high deduction rates. The universalization of taxation which implies equivalent efficiency requirements to all payers and an equivalent approach to the deduction of the tax amount irrespective of the income source, type of activity, or economic sector. It is not acceptable to introduce additional taxes, increased and differentiated rates, or tax allowances for different types of ownership, organizational or juridical structure Continue reading