“India generates most of its revenue through regressive taxes “
The basic definition of tax can relate to the compulsory levy of a certain amount by the government on the economical activities. The government generally imposes taxes to raise revenues, to redistribute the income and to promote the savings and the investment.
Types of taxation system practised in India :
Progressive tax refers to a levy wherein with the increase of income there is an increase in the taxes. If we consider India’s scenario out of the total tax that is collected the majority is an indirect tax. This system of taxation in India is regressive taxation system wherewith the income increase there is no increase in the tax and the tax ratio remains the same.
Ad valorem taxes are imposed on the value of the product. example- vat. incase of petrol and diesel state government impose taxes based on percentage on the base price that is state vat. On the other hand, specific taxes are imposed on the physical attribute of a product .example central government imposes excise duty on petrol and diesel as per litres.
Tax avoidance is when using loopholes the tax payment is reduced. there was an issue between the tax authority of India and Vodafone. Vodafone had purchased few telecom assets from a company but the deal happened outside India, tax authorities imposed a tax on Vodafone. but the loophole in the law is that as per the income tax act of 1961 any transaction that has happened outside India is not taxable. This concept of tax avoidance is not prohibited or illegal. But it is an unethical practice and if someone is caught avoiding tax no criminal liabilities can be imposed. Where in case of tax evasion let say there is a real estate who developed and sold many houses and generated 10 crores but in the document it showed the transaction of 5 crores as all other transactions were in cash and obtained illegally and it is very difficult for the government to find out the real income of the firm. So a special committee was set up by the government that referred as special investigation team on income tax, they recommended that the cash transaction shall only be done up to 3 lakhs on a particular transaction and the government again made a stricter policy and made it to 2 lakhs per transaction. This system of tax evasion is illegal and the criminal liabilities can be imposed on it.
