AN OVERVIEW OF GST

Abstract

The concept of Taxation, dates back to the days of ‘Arthashastra’, where the author Kautilya mentions that Taxation system shall be liberal is assessment and the same system shall be ruthless in collection of taxes. The power to tax is an incident of sovereignty. Constitution of India is the Supreme Grundnorm of the land and thus, all the other laws are subordinate to the Grundnorm as all the other laws derive their validity and the sanctity to sustain itself from the Constitution. “For the same reason all the laws shall also be interpreted in the light of the Constitutional Provisions. In India Cements Ltd. v. State of Tamil Nadu a seven-judge bench of the Supreme Court observed that the Constitution is ‘the mechanism under which the laws are to be made and not merely an Act which declare what the law is to be.’ One of the most important provisions of the Constitution relating to taxation is Article 265, which provides: ‘No tax shall be levied or collected except by authority of law.’ Therefore, not only the levy but also the collection of a tax must be under the authority of some law. And ‘Law’ over here means only the law enacted by a competent legislation and cannot include executive order.” There are two kinds of taxes i.e. Direct tax and Indirect tax. Direct Taxes are those taxes which are covered under the Income Tax Act, under Capital Gains, Income from Salary, Income from House Property, profits and gains of Business or Profession or from other sources. Direct taxes is only based upon the salary and the tax slabs. Whereas Indirect taxes is not at all based on the income of the person it is the sort of the tax which can be passed on the consumers. A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. An indirect tax is most often thought of as a tax that is shifting from one taxpayer to another, by way of an increase in the price of the good. Fuel, liquor, entertainment tax, service tax and cigarette taxes are all considered examples of indirect taxes, as many argue that the tax is actually paid by the end consumers, by way of a higher retail price. Some economists argue that indirect taxes lead to an inefficient market place and alter market place that don’t match equilibrium price.