[<–2/”>a >su_heading size=”21″]Tax Reforms IN INDIA[/su_heading]
Sience 1990 ie the Liberalization-2/”>Liberalization of Indian economy saw the beginning of Taxation reforms in the nation. The taxation system in the nation has been subjected to consistent and comprehensive reform. Following factors arise the need for tax reforms in India:-
- Tax Resources must be maximized for increased social sector Investment in the economy.
- International competitiveness must be imparted to Indian economy in the globalized world.
- Transaction costs are high which must be reduced.
- Investment flow should be maximized.
- Equity should be improved
- The high cost nature of Indian economy should be changed.
- Compliance should be increased.
[su_heading size=”21″]Direct & Indirect Tax Reforms[/su_heading]
Direct Tax reforms undertaken by the government are as follows:-
- Reduction and rationalization of tax rates, India now has three rates of Income tax with the highest being at 30%.
- SIMPLIFICATION of process, through e-filling and simplifying the tax return forms.
- Strengthening of administration to check the leakage and increasing the tax base.
- Widening of tax base to include more tax payers in the tax net.
- Withdrawal of tax exceptions gradually.
- Minimum Alternate Tax (MAT) was introduced for the ‘Zero Tax’ companies.
- The direct tax code of 2010 replace the outdated tax code of 1961.
Indirect tax reforms undertaken by the government are as follows:-
- Reduction in the peak tariff rates.
- reduction in the number of slabs
- Progressive change from specific duty to ad valor-em tax.
- VAT is introduced.
- GST has been planned to be introduced.
- Negative list of Services since 2012.
[su_heading]Subsidies- Cash Transfer of Subsidy Issue.[/su_heading]
A subsidy is a benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public.
Direct Cash Transfer Scheme is a POVERTY reduction measure in which government subsidies and other benefits are given directly to the poor in cash rather than in the form of subsidies.
It can help the government reach out to identified beneficiaries and can plug leakages. Currently, ration shop owners divert subsidised PDS grains or kerosene to open market and make fast buck. Such Leakages could stop. The scheme will also enhance efficiency of welfare schemes.
The Money is directly transferred into bank accounts of beneficiaries. LPG and kerosene subsidies, pension payments, scholarships and EMPLOYMENT guarantee scheme payments as well as benefits under other government welfare programmes will be made directly to beneficiaries. The money can then be used to buy services from the market. For eg. if subsidy on LPG or kerosene is abolished and the government still wants to give the subsidy to the poor, the subsidy portion will be transferred as cash into the banks of the intended beneficiaries.
It is feared that the money may not be used for the intended purpose and men may squander it.
Electronic Benefit Transfer (EBT) has already begun on a pilot basis in Andhra Pradesh, Chhattisgarh, Punjab, Rajasthan, Tamil Nadu, West Bengal, Karnataka, Pondicherry and Sikkim. The government claims the results are encouraging.
Only Aadhar card holders will get cash transfer. As of today, only 21 crore of the 120 crore people have Aadhar cards. Two other drawbacks are that most BPL families don’t have bank accounts and several villages don’t have any bank branches. These factors can limit the reach of cash transfer.
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Tax Reforms in India
India has been undergoing a series of tax reforms in recent years, with the goal of simplifying the tax system and making it more efficient. The most significant reform was the introduction of the Goods and Services Tax (GST) in 2017. The GST is a comprehensive indirect tax that replaced a number of different taxes, including the central excise duty, the service tax, and the value-added tax (VAT). The GST is designed to be a simpler and more efficient tax system, and it has been successful in reducing the number of indirect taxes and simplifying the tax compliance process.
In addition to the GST, the Indian government has also implemented a number of other tax reforms, including the introduction of a new direct tax code (DTC) and the simplification of the Corporate tax regime. The DTC is a new income tax code that is designed to simplify the tax system and make it more equitable. The DTC has not yet been implemented, but it is expected to be introduced in the near future. The corporate tax regime has also been simplified in recent years, with the government reducing the corporate tax rate from 30% to 25%.
These tax reforms have had a number of positive effects on the Indian economy. They have made the tax system simpler and more efficient, which has reduced the compliance burden on businesses and individuals. They have also made the tax system more equitable, which has helped to reduce income inequality. In addition, the tax reforms have helped to boost economic Growth by making it easier for businesses to operate in India.
However, there have also been some challenges associated with the tax reforms. One challenge has been the implementation of the GST. The GST is a complex tax system, and it has been difficult to implement it smoothly. There have been a number of problems with the GST, including delays in implementation and problems with the IT system. Another challenge has been the simplification of the corporate tax regime. The corporate tax rate has been reduced, but this has also led to a loss of revenue for the government.
Overall, the tax reforms in India have had a number of positive effects on the economy. They have made the tax system simpler and more efficient, which has reduced the compliance burden on businesses and individuals. They have also made the tax system more equitable, which has helped to reduce income inequality. In addition, the tax reforms have helped to boost economic growth by making it easier for businesses to operate in India. However, there have also been some challenges associated with the tax reforms, such as the implementation of the GST and the simplification of the corporate tax regime.
Subsidies- Cash Transfer of Subsidy Issue
Subsidies are payments made by the government to individuals or businesses to lower the cost of goods or services. They are often used to promote Economic Development or to protect vulnerable groups from rising prices.
There are two main types of subsidies: direct and indirect. Direct subsidies are payments made directly to individuals or businesses. Indirect subsidies are payments made to producers or suppliers of goods or services, which are then passed on to consumers in the form of lower prices.
Cash transfer of subsidies is a method of delivering subsidies directly to individuals or households. This is in contrast to traditional methods of delivering subsidies, such as through food stamps or vouchers.
There are a number of advantages to cash transfer of subsidies. First, it is more efficient. Direct payments to individuals or households are less likely to be lost or wasted than subsidies that are delivered through intermediaries. Second, cash transfer of subsidies is more equitable. It ensures that subsidies reach the intended beneficiaries, and it does not create distortions in the market. Third, cash transfer of subsidies can be used to target specific groups of people, such as the poor or the elderly.
However, there are also some challenges associated with cash transfer of subsidies. First, it can be difficult to administer. It requires a system for identifying and tracking beneficiaries, as well as a system for disbursing payments. Second, cash transfer of subsidies can be subject to fraud and abuse. Third, cash transfer of subsidies can lead to Inflation, if the government does not take steps to offset the increase in demand.
Overall, cash transfer of subsidies is a promising method of delivering subsidies. It is more efficient, equitable, and targeted than traditional methods of delivering subsidies. However, it is important to be aware of the challenges associated with cash transfer of subsidies, and to take steps to mitigate these challenges.
Tax Reforms in India
- What are the objectives of tax reforms in India?
The objectives of tax reforms in India are to simplify the tax system, make it more efficient, and reduce the tax burden on businesses and individuals.
- What are the key features of the new tax system?
The key features of the new tax system are that it is a single, unified tax system, it is based on the principle of self-assessment, and it has a lower tax rate.
- What are the benefits of the new tax system?
The benefits of the new tax system are that it is simpler, more efficient, and has a lower tax rate. This will make it easier for businesses to comply with the Tax Laws and will reduce the tax burden on businesses and individuals.
- What are the challenges of the new tax system?
The challenges of the new tax system are that it is a complex system and it will take time for businesses and individuals to get used to it. There are also concerns about the impact of the new tax system on the economy.
Direct & Indirect Tax Reforms
- What are direct taxes?
Direct taxes are taxes that are levied directly on the income of individuals and businesses. Examples of direct taxes are income tax, corporate tax, and Wealth tax.
- What are indirect taxes?
Indirect taxes are taxes that are levied on goods and services. Examples of indirect taxes are sales tax, value-added tax (VAT), and excise duty.
- What are the objectives of direct tax reforms?
The objectives of direct tax reforms are to simplify the tax system, make it more efficient, and reduce the tax burden on businesses and individuals.
- What are the objectives of indirect tax reforms?
The objectives of indirect tax reforms are to simplify the tax system, make it more efficient, and broaden the tax base.
- What are the key features of the new direct tax system?
The key features of the new direct tax system are that it is a single, unified tax system, it is based on the principle of self-assessment, and it has a lower tax rate.
- What are the key features of the new indirect tax system?
The key features of the new indirect tax system are that it is a single, unified tax system, it is based on the principle of destination-based taxation, and it has a lower tax rate.
- What are the benefits of the new direct tax system?
The benefits of the new direct tax system are that it is simpler, more efficient, and has a lower tax rate. This will make it easier for businesses to comply with the tax laws and will reduce the tax burden on businesses and individuals.
- What are the benefits of the new indirect tax system?
The benefits of the new indirect tax system are that it is simpler, more efficient, and has a lower tax rate. This will make it easier for businesses to comply with the tax laws and will reduce the tax burden on businesses and individuals.
- What are the challenges of the new direct tax system?
The challenges of the new direct tax system are that it is a complex system and it will take time for businesses and individuals to get used to it. There are also concerns about the impact of the new tax system on the economy.
- What are the challenges of the new indirect tax system?
The challenges of the new indirect tax system are that it is a complex system and it will take time for businesses and individuals to get used to it. There are also concerns about the impact of the new tax system on the economy.
Subsidies- Cash Transfer of Subsidy Issue
- What are subsidies?
Subsidies are payments made by the government to individuals or businesses to reduce the price of goods or services.
- What are the objectives of subsidies?
The objectives of subsidies are to provide relief to the poor, to promote economic development, and to protect the Environment.
- What are the types of subsidies?
There are two main types of subsidies: direct subsidies and indirect subsidies. Direct subsidies are payments made directly to individuals or businesses. Indirect subsidies are payments made to producers or suppliers of goods or services, which are then passed on to consumers in the form of lower prices.
- What are the problems with subsidies?
Subsidies can be problematic because they can lead to market distortions, they can be inefficient, and they can be difficult to administer.
- What is cash transfer of subsidy?
Cash transfer of subsidy is a system in which the government provides subsidies to individuals or businesses in the form of cash payments.
Question 1
Which of the following is not a direct tax in India?
(A) Income tax
(B) Corporate tax
(C) Wealth tax
(D) Excise duty
Answer
(D) Excise duty is an indirect tax.
Question 2
Which of the following is not an indirect tax in India?
(A) Sales tax
(B) Value-added tax (VAT)
(C) Excise duty
(D) Custom Duty
Answer
(C) Excise duty is a direct tax.
Question 3
Which of the following is a subsidy?
(A) A grant from the government to a company to help it with its research and development activities
(B) A grant from the government to a farmer to help him with his agricultural activities
(C) A grant from the government to a student to help him with his Education
(D) All of the above
Answer
(D) All of the above are subsidies.
Question 4
Which of the following is not a problem with cash transfers of subsidies?
(A) It is difficult to target the subsidies to the intended beneficiaries
(B) It is difficult to prevent leakage of subsidies to non-beneficiaries
(C) It is difficult to ensure that the subsidies are used for the intended purpose
(D) All of the above are problems with cash transfers of subsidies.
Answer
(D) All of the above are problems with cash transfers of subsidies.
Question 5
Which of the following is a solution to the problem of leakage of subsidies?
(A) Use of smart cards
(B) Use of biometrics
(C) Use of direct benefit transfer (DBT)
(D) All of the above
Answer
(D) All of the above are solutions to the problem of leakage of subsidies.
Question 6
Which of the following is a benefit of DBT?
(A) It reduces leakage of subsidies
(B) It reduces Corruption
(C) It increases transparency
(D) All of the above
Answer
(D) All of the above are benefits of DBT.