CHAPTER 1 INTRODUCTION 1.1 Introduction Tax is money paid to the government for the revenue of the country.

It is imposed on Persons income and plays a vital role in the economic growth & stability of our country. The word 'Tax' originated from the 'Taxation', which mean 'Estimate'. In India, there is two types of taxes, they are, Direct and Indirect Taxes. Goods and Service Tax is been described with its Model, Structure and Benefits

1.2 Research Objective Researcher objective in this project is to show the details of Goods and Service Tax, maintaining of accounts and the highlights of the Union Budget for the F.Y. 2012-2013 with Income Slabs. 1.3 Research Methodology There are Two types of Data Collection Method of research i.e. Primary and Secondary data. In these project Secondary data is used. Secondary data is one which already exists and is collected from the published sources. The sources from which secondary data was collected are: Books, Newspaper, and Internet
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CHAPTER 2

TAXATION IN INDIA
The Government of India imposes an income tax on taxable income of Individuals, Hindu Undivided Families (HUFs), Companies, Firms, Co-operative societies and Trusts (identified as body of individuals and association of persons) and any other Artificial Person. Levy of tax is separate on each of the Persons. India has a well developed tax structure with a three-tier federal structure, comprising the Central Government, the State Governments and the Urban/Rural Local Bodies. The power to levy taxes and duties is distributed among the three tiers of Governments, in accordance with the provisions of the Indian Constitution. The main taxes/duties that the Central Government is empowered to levy are Income Tax (except tax on agricultural income, which the State Governments can levy), Customs duties, Central Excise and Sales Tax and Service Tax. The principal taxes levied by the State Governments are Sales Tax (tax on intraState sale of goods), Stamp Duty (duty on transfer of property), State Excise (duty on manufacture of alcohol), Land Revenue (levy on land used for agricultural/nonagricultural purposes), Duty on Entertainment and Tax on Professions and Callings. The Local Bodies are empowered to levy tax on properties (buildings, etc.), Octroi (tax on entry of goods for use/consumption within areas of the Local Bodies), Tax on Markets and Tax/User Charges for utilities like water supply, drainage, etc.

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Since 1991 tax system in India has under gone a radical change, in line with liberal economic policy and WTO commitments of the country. Some of the changes are:

Reduction in customs and excise duties Lowering corporate Tax Widening of the tax base and toning up the tax administration

2.1 MAINTENANCE OF ACCOUNTS Every person shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of the Code. Every person who has entered into an international transaction shall keep and maintain such information and document in respect thereof, as may be prescribed. The person referred shall be the following:(a) any person carrying on legal, medical, engineering, architectural profession or profession of accountancy, technical consultancy, interior decoration or any other profession as is notified by the Board in the Official Gazette; (b) any other person carrying on business, if, his income from the business exceeds two lakh rupees; his total turnover or gross receipts, as the case may be, in the business exceeds ten lakh rupees in any one of the three financial years immediately preceding the relevant financial year; or

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 in a case where the business is newly set up in any financial year, his income from the business is likely to exceed two lakh rupees or his total turnover or gross receipts, as the case may be, in the business is likely to exceed ten lakh rupees, during such financial year. The books of accounts referred shall be the following, namely, a cash book; a journal, if the accounts are maintained according to the mercantile system of accounting; a ledger; register of daily inventory of business trading asset; carbon copies of serially numbered bills issued by the person, if the value of the bill exceeds fifty rupees; carbon copies or counterfoils of serially numbered receipts issued by the person, if the value of the bill exceeds fifty rupees; original bills or receipts issued to the person in respect of expenditure incurred by him, if the amount of the expenditure exceeds fifty rupees; payment vouchers prepared and signed by the person in respect of expenditure not exceeding fifty rupees, if there are no bills or receipts for such expenditure.

2.2 TAX AUDIT Every person, who is required to keep and maintain books of accounts shall get it accounts for the financial year audited if,-

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 in a case where the person is carrying on any profession, the gross receipts of the profession exceed ten lakh rupees in the financial year; and in a case where the person is carrying on any business, the total turnover or gross receipts, as the case may be, of the business exceed forty lakh rupees in the financial year. The audit of the accounts should be performed by an accountant and the report of audit obtained before the due date, which should be obtained in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.

2.3 ONLINE TAX FILING In India, online tax filing has become an integral part of the process of registering tax returns. With the increasing penetration of internet and rising levels of web awareness and work pressure among tax payers, many people now prefer to fill the tax according to their convenience and avoid the cues. 2.3.1 History of Online Tax Filing in India The online filing of taxes in India started, approximately, during 2002 after recommendations from the Kelkar Committee Report. The report made the following suggestions:

Outsourcing the departmental functions that are outside the core area of expertise

Reducing exemptions, relief, deductions, and rebates

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2.3.2 Filing Online Tax in India The basic steps for filing tax returns online in India can be mentioned as below:

Customers need to sign up with the service provider to be able to avail their services

After signing up, customers need to enter their financial details. The returns will be generated on the basis of the entries.

Once the data is entered the software reviews it. After the computation is done, the clients need to give the payment on the basis of the filing plan chosen by them.

Next, the user needs to authorize the service provider to file the tax returns on their behalf.

The acknowledgment will be provided via e-mail once the process is completed and the document is signed digitally. The customer receives an ITR-V if the document is not signed digitally. 2.3.3 Advantages of Online Tax Filing in India

Following are the major benefits for tax payers who use the tax filing portals:

These companies provide the users in depth knowledge of tax laws The technology used by these companies is comparable to the best banks across the world

Tax computation services are provided free of cost. Tax payers only need to pay when they are filing the tax returns

They do not put the users off with unnecessary pop-ups or advertisements
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Majority of these sites are backed by the Income Tax Department. This means that these companies are authorized to file tax returns with the IT department on behalf of their customers

Tax returns can be prepared and filed by customers from any income class.

2.3.4 Online Tax Filing Software in India

The process of e-filing tax returns has been made easier with the various online service providers who have come up with software designed specifically for such purposes.

These products and services are normally availed by the following classes of tax payers:

Salaried tax payers Tax payers receiving income from interest, family pensions, dividends, agricultural income, and gifts

People earning from their residential real estate properties Tax payers who have brought forward losses. This does not include losses resulting from maintaining and owning race horses

Tax payers earning from selling investments such as shares, bonds, and mutual funds

Taxpayers with clubbed income

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2.3.5 Online Tax Filing in India - Procedure for Calculations As soon as the customers enter their details in the concerned sections, the software starts to update the information and does the calculation on basis of taxable income as well as payable taxes. 2.3.6 Income Tax Filing in India The last date for submitting the acknowledgment form for the financial year of 2011-12 has been extended to March 31, 2012. Tax payers can avail the My Account option in case they want refund on their payments. The same facility is available for tax payers who wish to resend the CPC - Intimation u/s 143 (1) /154.

Digital Signature Certificates have been made regulatory with immediate effect from July 1, 2011. This will be applicable for individuals and companies whose accounts have to be audited as per section 44 AB of the Income Tax Act of 1961.

2.3.7 New Process for Filing Tax Returns through Legal Heirs with DSC

When legal heirs file their income tax returns they need to get their DSC. They are required to make the request through an e mail to ask@incometaxindia.gov.in.

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They are also supposed to provide the following details in this application:

Name Date of birth of the Legal Heir PAN Scanned attachment copy of the deceased's death certificate Date of birth of the deceased

Once these details are provided the Legal Heir will be able to file the returns of the deceased individual through the DSC. 2.3.8 Tax Credits in 26AS Statements

Tax payers should verify the tax credits they are eligible to receive through their 26AS statements before they file their income tax returns. This will help them get refunds in lesser time and the entire process will be completed quicker than usual. In case there are irregularities in the 26AS statement, tax payers can get in touch with the Deductors.

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2.3.9 Process of filing income taxes in India

The first step of filing income tax in India is choosing the appropriate kind of return form. The taxpayers need to download the appropriate preparation software for the return form in question. Afterwards they are supposed to file an offline return and create a XML file. Once these processes are completed, the taxpayers need to register on the following site and create their username and passwords: https://incometaxindiaefiling.gov.in/portal/index.do Afterwards they can login at the site and click on the concerned panel and then select the "submit return" button. Once it is done they can upload the XML file. As soon as the entire process is done successfully the acknowledgment details are displayed and they can get printouts of the ITR-V or acknowledgment form. Tax payers can sign the acceptance form digitally or offline. Once it is done the tax payers need to obtain a printed copy of the same and mail it to the following address: Income Tax Department - CPC, Post Bag No - 1, Electronic City Post Office, Bengaluru - 560100, Karnataka The mail should be send only through speed post or ordinary post and it should be sent within 120 days after the data is transmitted. The form will not be accepted if it is sent via courier or registered post.

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CHAPTER 3 GOODS AND SERVICES TAX

Currently, India is following the unitary system for collection of Indirect Taxes levied on manufacture, sale and consumption of goods as well as services in order to create a suitable reform in Indirect tax from both domestic and foreign investment perspective thereby reducing burdensome compliance, high cost of transaction and nagging uncertainty in tax liability for a business. The budget speech of 2006-2007 included a proposal for commencement of Goods and Services Tax (GST) and in the budget speech of 2009-10 it has been said again that the introduction of GST would be accelerated with effect from April 01, 2010. GST model is outlined with a dual GST consisting of a Central and a State GST. To relieve the pressure on States, an assistance of Rs 1,000 crore will be provided to them for GST implementation The Indian government is studying tax reforms that include many other Central and State level direct and indirect taxes, excise duties, service tax and luxury tax, and replace them with a single Goods and Service Tax (GST). Customs duty will be levied out of GST and is likely to be replaced by VAT on imports. The introduction of goods and services tax will create an effect for abolition of taxes such as octroi, Central sales tax, State level sales tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services, and get rid of the cascading effects of multiple layers of taxation.

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The predicted rate for the proposed GST is going to be 20 percent. Petroleum products and liquor are however likely to stay behind the GST structure. Liquor and tobacco could be included in GST. States could impose an additional tax on these products. Goods and services that are subject to GST can be taxed at standard rate, which is at a fixed rate of, for example 5% or 10%, and at zero rate. Zero rating is a concept only found under the GST framework. Suppliers of zero rated supplies do not collect GST because the GST rate is zero.

3.1 PURCHASE TAX - GST IN INDIA Some of the States felt that they are getting substantial revenue from Purchase Tax and, therefore, it should not be subsumed under GST while majority of the States were of the view that no such exemptions should be given. The difficulties of the food grains producing States and certain other States were appreciated as substantial revenue is being earned by them from Purchase Tax and it was, therefore, felt that in case Purchase Tax has to be subsumed then adequate and continuing compensation has to be provided to such States. This issue is being discussed in consultation with the Government of India. Tax on items containing Alcohol: Alcoholic beverages would be kept out of the purview of GST. Sales Tax/VAT can be continued to be levied on alcoholic beverages as per the existing practice. In case it has been made Vatable by some States, there is no objection to that. Excise Duty, which is presently being levied by the States may not be also affected.

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 Tax on Tobacco products: Tobacco products would be subjected to GST with ITC. Centre may be allowed to levy excise duty on tobacco products over and above GST without ITC.. Tax on Petroleum Products: As far as petroleum products are concerned, it was decided that the basket of petroleum products, i.e. crude, motor spirit (including ATF) and HSD would be kept outside GST as is the prevailing practice in India. Sales Tax could continue to be levied by the States on these products with prevailing floor rate. Similarly, Centre could also continue its levies. A final view whether Natural Gas should be kept outside he GST will be taken after further deliberations. Taxation of Services : As indicated earlier, both the Centre and the States will have concurrent power to levy tax on all goods and services. In the case of States, the principle for taxation of intra-State and inter-State has already been formulated by the Working Group of Principal Secretaries/Secretaries of Finance/Taxation and Commissioners of Trade Taxes with senior representatives of Department of Revenue, Government of India. For interState transactions an innovative model of Integrated GST will be adopted by appropriately aligning and integrating CGST and SGST.

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3.2 GOODS & SERVICES TAX MODEL FOR INDIA It is important to take note of the significant administrative issues involved in designing an effective GST model in a federal system with the objective of having an overall harmonious structure of rates. Together with this, there is a need for upholding the powers of Central and State Governments in their taxation matters. Further, there is also the need to propose a model that would be easily implementable, while being generally acceptable to stakeholders.

3.2.1Salient features of the GST model Keeping in view the report of the Joint Working Group on Goods and Services Tax, the views received from the States and Government of India, a dual GST structure with defined functions and responsibilities of the Centre and the States is recommended. An appropriate mechanism that will be binding on both the Centre and the States would be worked out whereby the harmonious rate structure along with the need for further modification could be upheld, if necessary with a collectively agreed Constitutional Amendment. Salient features of the proposed model are as follows: The GST shall have two components: one levied by the Centre (hereinafter referred to as Central GST), and the other levied by the States (hereinafter referred to as State GST). Rates for Central GST and State GST would be prescribed appropriately, reflecting revenue considerations and acceptability. This dual GST model would be implemented through multiple statutes (one for CGST and SGST statute for every State). However, the basic features of law such as chargeability, definition of taxable event and taxable person,
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measure of levy including valuation provisions, basis of classification etc. would be uniform across these statutes as far as practicable. The Central GST and the State GST would be applicable to all transactions of goods and services made 15 for a consideration except the exempted goods and services, goods which are outside the purview of GST and the transactions which are below the prescribed threshold limits. The Central GST and State GST are to be paid to the accounts of the Centre and the States separately. It would have to be ensured that account-heads for all services and goods would have indication whether it relates to Central GST or State GST (with identification of the State to whom the tax is to be credited). Since the Central GST and State GST are to be treated separately, taxes paid against the Central GST shall be allowed to be taken as input tax credit (ITC) for the Central GST and could be utilized only against the payment of Central GST. The same principle will be applicable for the State GST. A taxpayer or exporter would have to maintain separate details in books of account for utilization or refund of credit. Further, the rules for taking and utilization of credit for the Central GST and the State GST would be aligned. Cross utilization of ITC between the Central GST and the State GST would not be allowed except in the case of inter-State supply of goods and services under the IGST model which is explained later. Ideally, the problem related to credit accumulation on account of refund of GST should be avoided by both the Centre and the States except in the cases such as exports, purchase of capital goods, input tax at higher rate than output tax etc. where, again refund/adjustment should be completed in a time bound manner.
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 To the extent feasible, uniform procedure for collection of both Central GST and State GST would be prescribed in the respective legislation for Central GST and State GST. The administration of the Central GST to the Centre and for State GST to the States would be given. This would imply that the Centre and the States would have concurrent jurisdiction for the entire value chain and for all taxpayers on the basis of thresholds for goods and services prescribed for the States and the Centre. The present threshold prescribed in different State VAT Acts below which VAT is not applicable varies from State to State. A uniform State GST threshold across States is desirable and, therefore, it is considered that a threshold of gross annual turnover of Rs.10 lakh both for goods and services for all the States and Union Territories may be adopted with adequate compensation for the States (particularly, the States in North-Eastern Region and Special Category States) where lower threshold had prevailed in the VAT regime. Keeping in view the interest of small traders and small scale industries and to avoid dual control, the States also considered that the threshold for Central GST for goods may be kept at Rs.1.5 crore and the threshold for Central GST for services may also be appropriately high. It may be mentioned that even now there is a separate threshold of services (Rs. 10 lakh) and goods (Rs. 1.5 crore) in the Service Tax and CENVAT. The States are also of the view that Composition/ Compounding Scheme for the purpose of GST should have an upper ceiling on gross annual turnover and a floor tax rate with respect to gross annual turnover. In particular, there would be a compounding cut-off at Rs. 50 lakh of gross annual turn over and a floor rate of 0.5% across the States.

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The scheme would also allow option for GST registration for dealers with turnover below the compounding cut-off. The taxpayer would need to submit periodical returns, in common format as far as possible, to both the Central GST authority and to the concerned State GST authorities. Each taxpayer would be allotted a PAN-linked taxpayer identification number with a total of 13/15 digits. This would bring the GST PAN-linked system in line with the prevailing PAN-based system for Income tax, facilitating data exchange and taxpayer compliance. Keeping in mind the need of tax payers convenience, functions such as assessment, enforcement, scrutiny and audit would be undertaken by the authority which is collecting the tax, with information sharing between the Centre and the States.

3.3 GST RATE STRUCTURE The Empowered Committee has decided to adopt a two-rate structure a lower rate for necessary items and goods of basic importance and a standard rate for goods in general. There will also be a special rate for precious metals and a list of exempted items. For upholding of special needs of each State as well as a balanced approach to federal flexibility, and also for facilitating the introduction of GST, it is being discussed whether the exempted list under VAT regime including Goods of Local Importance may be retained in the exempted list under State GST in the initial years. It is also being discussed whether the Government of India may adopt, to begin with, a similar approach towards exempted list under the CGST.
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The States are of the view that for CGST relating to goods, the Government of India may also have a two-rate structure, with conformity in the levels of rate under the SGST. For taxation of services, there may be a single rate for both CGST and SGST. The exact value of the SGST and CGST rates, including the rate for services, will be made known duly in course of appropriate legislative actions. o Zero Rating of Exports: Exports would be zero-rated. Similar benefits may be given to Special Economic Zones (SEZs). However, such benefits will only be allowed to the processing zones of the SEZs. No benefit to the sales from an SEZ to Domestic Tariff Area (DTA) will be allowed. o GST on Imports: The GST will be levied on imports with necessary Constitutional Amendments. Both CGST and SGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services. o Special Industrial Area Scheme: After the introduction of GST, the tax exemptions, remissions etc. related to industrial incentives should be converted, if at all needed, into cash refund schemes after collection of tax, so that the GST scheme on the basis of a continuous chain of set-offs is not disturbed. Regarding Special Industrial
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Area Schemes, it is clarified that such exemptions, remissions etc. would continue up to legitimate expiry time both for the Centre and the States. Any new exemption, remission etc. or continuation of earlier exemption, remission etc. would not be allowed. In such cases, the Central and the State Governments could provide reimbursement after collecting GST. o IT Infrastructure: After acceptance of IGST Model for Inter-State transactions, the major responsibilities of IT infrastructural requirement will be shared by the Central Government through the use of its own IT infrastructure facility. The issues of tying up the State Infrastructure facilities with the Central facilities as well as further improvement of the States own IT infrastructure, including TINXSYS, is now to be addressed expeditiously and in a time bound manner. o Constitutional Amendments, Legislations and Rules for administration of CGST and SGST: It is essential to have Constitutional Amendments for empowering the States for levy of service tax, GST on imports and consequential issues as well as corresponding Central and State legislations with associated rules and procedures. With these specific tasks in view, a Joint Working Group has recently been constituted (September 30, 2009) comprising of the officials of the Central and State Governments to prepare, in a time bound manner a draft legislation for Constitutional Amendment, draft legislation for CGST, a suitable Model Legislation for SGST and rules and procedures for CGST and SGST. Simultaneous steps have also been initiated for drafting of a
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legislation for IGST and rules and procedures. As a part of this exercise, the Working Group will also address the issues of dispute resolution and advance ruling.

3.4 JUSTIFICATION OF GST Despite this success with VAT, there are still certain shortcomings in the structure of VAT both at the Central and at the State level. The shortcoming in CENVAT of the Government of India lies in non-inclusion of several Central taxes in the overall framework of CENVAT, such as additional customs duty, surcharges, etc., and thus keeping the benefits of comprehensive input tax and service tax set-off out of reach for manufacturers/ dealers. Moreover, no step has yet been taken to capture the value-added chain in the distribution trade below the manufacturing level in the existing scheme of CENVAT. The introduction of GST at the Central level will not only include comprehensively more indirect Central taxes and integrate goods and service taxes for the purpose of set-off relief, but may also lead to revenue gain for the Centre through widening of the dealer base by capturing value addition in the distributive trade and increased compliance. In the existing State-level VAT structure there are also certain shortcomings as follows. There are, for instance, even now, several taxes which are in the nature of indirect tax on goods and services, such as luxury tax, entertainment tax, etc., and yet not subsumed in the VAT. Moreover, in the present State-level VAT scheme, CENVAT load on the goods remains included in the value of goods to be taxed under State VAT, and contributing to that extent a cascading effect on account of CENVAT element. This CENVAT load needs to be removed. Furthermore, any
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commodity, in general, is produced on the basis of physical inputs as well as services, and there should be integration of VAT on goods with tax on services at the State level as well, and at the same time there should also be removal of cascading effect of service tax. In the GST, both the cascading effects of CENVAT and service tax are removed with set-off, and a continuous chain of set-off from the original producers point and service providers point upto the retailers level is established which reduces the burden of all cascading effects. This is the essence of GST, and this is why GST 10 is not simply VAT plus service tax but an improvement over the previous system of VAT and disjointed service tax. However, for this GST to be introduced at the Statelevel, it is essential that the States should be given the power of levy of taxation of all services. This power of levy of service taxes has so long been only with the Centre. A Constitutional Amendment will be made for giving this power also to the States. Moreover, with the introduction of GST, burden of Central Sales Tax (CST) will also be removed. The GST at the State-level is, therefore, justified for (a) additional power of levy of taxation of services for the States, (b) system of comprehensive set-off relief, including set-off for cascading burden of CENVAT and service taxes, (c) subsuming of several taxes in the GST and (d) removal of burden of CST. Because of the removal of cascading effect, the burden of tax under GST on goods will, in general, fall.

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The GST at the Central and at the State level will thus give more relief to industry, trade, agriculture and consumers through a more comprehensive and wider coverage of input tax set-off and service tax setoff, subsuming of several taxes in the GST and phasing out of CST. With the GST being properly formulated by appropriate calibration of rates and adequate compensation where necessary, there may also be revenue/ resource gain for both the Centre and the States, primarily through widening of tax base and possibility of a significant improvement in taxcompliance. In other words, the GST may usher in the possibility of a collective gain for industry, trade, agriculture and common consumers as well as for the Central Government and the State Governments. The GST may, indeed, lead to the possibility of collectively positive-sum game.

3.5 INTER-STATE TRANSACTIONS OF GOODS AND SERVICES The Empowered Committee has accepted the recommendations of the Working Group of concerned officials of Central and State Governments for adoption of IGST model for taxation of inter-State transaction of Goods and Services. The scope of IGST Model is that Centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services. The inter-State seller will pay IGST on value addition after adjusting available credit of IGST, CGST, and SGST on his purchases. The Exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The Importing dealer will claim credit of IGST while discharging his output tax liability in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. The relevant information will also be submitted to the Central Agency
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which will act as a clearing house mechanism, verify the claims and inform the respective governments to transfer the funds. The major advantages of IGST Model are: Maintenance of uninterrupted ITC chain on inter- State transactions. No upfront payment of tax or substantial blockage of funds for the interState seller or buyer. No refund claim in exporting State, as ITC is used up while paying the tax. Self monitoring model. Level of computerization is limited to inter-State dealers and Central and State Governments should be able to computerize their processes expeditiously. As all inter-State dealers will be e-registered and correspondence with them will be by e-mail, the compliance level will improve substantially. Model can take Business to Business as well as Business to Consumer transactions into account.

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3.6 GST IN OTHER COUNTRIES More than 140 countries have introduced GST in some form. It has been a part of the tax landscape in Europe for the past 50 years and is fast becoming the preferred form of indirect tax in the Asia Pacific region. It is interesting to note that there are over 40 models of GST currently in force, each with its own peculiarities. While countries such as Singapore and New Zealand tax virtually everything at a single rate, Indonesia has five positive rates, a zero rate and over 30 categories of exemptions. In China, GST applies only to goods and the provision of repairs, replacement and processing services. It is only recoverable on goods used in the production process, and GST on fixed assets is not recoverable. There is a separate business tax in the form of VAT. For example, when the GST was introduced in New Zealand in 1987, it yielded revenues that were 45 per cent higher than anticipated, in large part due to improved compliance. It is more neutral and efficient structure could yield significant dividends to the economy in increased output and productivity. The GST in Canada replaced the federal manufacturers sales tax which was then levied at the rate of 13 per cent and was similar in design and structure as the CENVAT in India. It is estimated that this replacement resulted in an increase in potential GDP by 1.4 per cent, consisting of 0.9 per cent increase in national income from higher factor productivity and 0.5 per cent increase from a larger capital stock (due to elimination of tax cascading). The Canadian experience is suggestive of the potential benefits to the Indian economy. This means gains of about US$ 15 billion annually. Discounting these flows at a modest 3 per cent per annum, the present value of the GST works out to about half a trillion dollars. This is indeed a staggering sum and suggests the need for energetic action to usher the GST regime at an early date. GST rates of some countries are given below.
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Country

Rate of GST (in percent)

Australia France Canada Germany Japan Singapore Sweden

10 19.6 5 19 5 7 25

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CHAPTER 4 DIRECT TAX CODE

The direct tax code seeks to consolidate and amend the law relating to all direct taxes, namely, income-tax, dividend distribution tax, fringe benefit tax and wealth-tax so as to establish an economically efficient, effective and equitable direct tax system which will facilitate voluntary compliance and help increase the Tax-GDP ratio. Another objective is to reduce the scope for disputes and minimize litigation. It is designed to provide stability in the tax regime as it is based on well accepted principles of taxation and best international practices. It will eventually pave the way for a single unified taxpayer reporting system. The salient features of the code are:

Single Code for direct taxes: All the direct taxes have been brought under a single Code and compliance procedures unified. This will eventually pave the way for a single unified taxpayer reporting system.

Elimination of regulatory functions: Traditionally, the taxing statute has also been used as a regulatory tool. However, with regulatory authorities being established in various sectors of the economy, the regulatory function of the taxing statute has been withdrawn. This has significantly contributed to the simplification exercise.

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Use of simple language: With the expansion of the economy, the number of taxpayers can be expected to increase significantly. The bulk of these taxpayers will be small, paying moderate amounts of tax. Therefore, it is necessary to keep the cost of compliance low by facilitating voluntary compliance by them. This is sought to be achieved, inter alia, by using simple language in drafting so as to convey, with clarity, the intent, scope and amplitude of the provision of law. Each sub-section is a short sentence intended to convey only one point. All directions and mandates, to the extent possible, have been conveyed in active voice.

Reducing the scope for litigation: Possibly, an attempt has been made to avoid ambiguity in the provisions that invariably give rise to rival interpretations. The objective is that the tax administrator and the tax payer are ad idem on the provisions of the law and the assessment results in a finality to the tax liability of the tax payer. To further this objective, power has also been delegated to the Central Government/Board to avoid protracted litigation on procedural issues.

Flexibility: The structure of the statute has been developed in a manner which is capable of accommodating the changes in the structure of a growing economy without resorting to frequent amendments. Therefore, to the extent possible, the essential and general principles have been reflected in the statute and the matters of detail are contained in the rules/schedules.

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Ensure that the law can be reflected in a Form: For most taxpayers, particularly the small and marginal category, the tax law is what is reflected in the Form. Therefore, the structure of the tax law has been designed so that it is capable of being logically reproduced in a Form.

Consolidation of provisions: In order to enable a better understanding of tax legislation, provisions relating to definitions, incentives, procedure and rates of taxes have been consolidated. Further, the various provisions have also been rearranged to make it consistent with the general scheme of the Act.

Providing stability: At present, the rates of taxes are stipulated in the Finance Act of the relevant year. Therefore, there is a certain degree of uncertainty and instability in the prevailing rates of taxes. Under the Code, all rates of taxes are proposed to be prescribed in the First to the Fourth Schedule to the Code itself thereby obviating the need for an annual Finance Bill. The changes in the rates, if any, will be done through appropriate amendments to the Schedule brought before Parliament in the form of an Amendment Bill.

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CHAPTER 5

BUDGET 2012
NEW DELHI: Finance minister Pranab Mukherjee presented India's budget on Friday for the coming financial year 2012-2013. 5.1 APPROACH TO THE BUDGET * For Indian economy, recovery was interrupted this year due to intensification of debt crises in Euro zone, political turmoil in Middle East, rise in crude oil price and earthquake in Japan. * GDP is estimated to grow by 6.9 per cent in 2011-12, after having grown at 8.4 per cent in preceding two years. * India however remains front runner in economic growth in any cross-country comparison. * Monetary and fiscal policy response for better part of past 2 years aimed at taming domestic inflationary pressure. * Growth moderated and fiscal balance deteriorated due to tight monetary policy and expanded outlays. * Indicators suggest that economy is turning around as core sectors and manufacturing show signs of recovery. * At this juncture, it is necessary to take hard decision to improve macroeconomic environment and strengthen domestic growth drivers.

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* Twelfth Five Year Plan to be launched with the aim of "faster, sustainable and more inclusive growth". Five objectives identified to be addressed effectively in ensuring fiscal year. * If India can build on its economic strength, it can be a source of stability for world economy and a safe destination for restless global capital. 5.2 OVERVIEW OF THE ECONOMY * GDP growth estimated at 6.9 per cent in real terms in 2011-12. Slowdown in comparison to preceding two years is primarily due to deceleration in industrial growth. * Headline inflation expected to moderate further in next few months and remain stable thereafter. * Steps taken to bridge gaps in distribution, storage and marketing systems have helped in more effective management of inflation. * Developments in India's external trade in the first half of current year have been encouraging. Diversification in export and import market achieved. * Current account deficit at 3.6 per cent of GDP for 2011-12 and reduced net capital inflow in the 2nd and 3rd quarters put pressure on exchange rate. * India's GDP growth in 2012-13 expected to be 7.6 per cent +/- 0.25 per cent. * Deterioration in fiscal balance in 2011-12 due to slippages in direct tax revenue and increased subsidies.

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5.3 FRBM ACT * Introduction of amendments to the FRBM Act as part of Finance Bill, 2012. * Concept of "Effective Revenue Deficit" and "Medium Term Expenditure * Framework" statement are two important features of amendment to FRBM Act in the direction of expenditure reforms. * Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. This will help in reducing consumptive component of revenue deficit and create space for increased capital spending. * "Medium-term Expenditure Framework" statement will set forth a three-year rolling target for expenditure indicators. * Recommendations of the Expert Committees to streamline and reduce the number of centrally sponsored schemes and to address plan and non-plan classification to be kept in view while implementing Twelfth Plan. * Central Plan Scheme Monitoring System to be expanded for better tracking and utilisation of funds. 5.4 SUBSIDIES * Some subsidies, while being inevitable, may become undesirable if they compromise the macroeconomic fundamentals of economy. * Subsidies related to administering the Food Security Act will be fully provided for. * Endeavour to keep central subsidies under 2 per cent of GDP in 2012-13. Over next 3 year, to be further brought down to 1.75 per cent of GDP.
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* Based on recommendation of task force headed by Shri Nandan Nilekani, a mobile-based Fertilizer Management System has been designed to provide endtoend information on movement of fertilisers and subsidies. Nation-wide roll out during 2012. * All three public sector Oil Marketing Companies have launched LPG transparency portals to improve customer service and reduce leakage. * Endeavour to scale up and roll out Aadhaar enabled payments for various government schemes in atleast 50 districts within next 6 months. 5.5 TAX REFORMS * DTC Bill to be enacted at the earliest after expeditious examination of the report of the Parliamentary Standing Committee. * Drafting of model legislation for the Centre and State GST in concert with States is under progress. * GST network to be set up as a National Information Utility and to become operational by August 2012. 5.6 DISINVESTMENT POLICY *Government has further evolved its approach to divestment of Central Public Sector Enterprises by allowing them a level playing field vis-a-vis the private sector in respect of practices like buy backs and listing at stock exchanges. *For 2012-13, '30,000 crore to be raised through disinvestment. At least 51 per cent ownership and management control to remain with Government.

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5.7 STRENGTHENING INVESTMENT ENVIRONMENT 5.7.1 Foreign Direct Investment * Efforts to arrive at a broadbased consensus in consultation with the State Governments in respect of decision to allow FDI in multi-brand retail upto 51 per cent. 5.7.2 Advance Pricing Agreement * Provision regarding implementation of Advance Pricing Agreement to be introduced in Finance Bill, 2012. 5.7.3 Financial Sector * Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of 50 per cent to new retail investors, who invest upto '50,000 directly in equities and whose annual income is below `10 lakh to be introduced. The scheme will have a lock-in period of 3 years. 5.7.4 Capital Market * Various steps proposed to be taken for deepening the reforms in the Capital markets, including simplifying process of IPOs, allowing QFIs to access Indian Bond Market etc. 5.7.5 Legislative Reforms * Official amendment to "The Pension Fund Regulatory and Development Authority Bill, 2011", "The Banking Laws (Amendment) Bill, 2011" and "The Insurance Law (Amendment) Bill, 2008" to be moved in this session. * Various Bills proposed to be moved in the Budget session of the Parliament to take forward the process of financial sector legislative reforms. Capitalisation of Banks and Financial Holding Company
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* To protect the financial health of Public Sector Banks and Financial Institutions, `15,888 crore proposed to be provided for capitalisation. Possibility of creating a financial holding company to raise resources to meet the capital requirments of PSU Banks under examination. * A central "Know Your Customer" depository to be developed in 2012-13 to avoid multiplicity of registration and data upkeep. 5.7.6 Priority Sector Lending * Revised guidelines on priority sector lending to be issued after stakeholder consultation. 5.7.7 Financial Inclusion * Out of 73,000 identified habitations that were to be covered under "Swabhimaan" campaign by March, 2012, about 70,000 habitations have been covered. Rest likely to be covered by March 31, 2012. * As a next step, Ultra Small Branches are being set up at these habitations. n In 2012-13, "Swabhimaan" campaign to be extended to more habitations. Regional Rural Banks * Out of 82 RRBs in India, 81 have successfully migrated to Core Banking Solutions and have also joined the National Electronic Fund Transfer system. * Proposal to extend the scheme of capitalisation of weak RRBs by another 2 years to enable States to contribute their share.

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5.8 INFRASTRUCTURE AND INDUSTRIAL DEVELOPMENT * During Twelfth Plan period, investment in infrastructure to go up to `50 lakh crore with half of this, expected from private sector. * More sectors added as eligible sectors for Viability Gap Funding under the scheme "Support to PPP in infrastructure". * Government has approved guidelines for establishing joint venture companies by defence PSUs in PPP mode. * First Infrastructure Debt Fund with an initial size of `8,000 crore launched earlier this month. * Tax free bonds of `60,000 crore to be allowed for financing infrastructure projects in 2012-13. * A harmonised master list of infrastructure sector approved by the Government. * IIFCL has put in place a structure for credit enhancement and take-out finance for easing access of credit to infrastructure projects. 5.8.1 National Manufacturing Policy * National Manufacturing Policy announced with the objective of raising, within a decade, the share of manufacturing in GDP to 25 per cent and creating of 10 crore jobs. 5.8.2 Power and Coal * Coal India Limited advised to sign fuel supply agreements with power plants, having long-term PPAs with DISCOMs and getting commissioned on or before March 31, 2015.

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* External Commercial Borrowings (ECB) to be allowed to part finance Rupee debt of existing power projects. 5.8.3 Transport: Roads and Civil Aviation * Target of covering a length of 8,800 kilometer under NHDP next year. * Allocation of the Road Transport and Highways Ministry enhanced by 14 per cent to `25,360 crore. * ECB proposed to be allowed for capital expenditure on the maintenance and operations of toll systems for roads and highways, if they are part of original project. * Direct import of Aviation Turbine Fuel permitted for Indian Carriers as actual users. * ECB to be permitted for working capital requirement of airline industry for a period of one year, subject to a total ceiling of US $ 1 billion. * Proposal to allow foreign airlines to participate upto 49 per cent in the equity of an air transport undertaking under active consideration of the government. Delhi Mumbai Industrial Corridor * In September 2011 central assistance of `18,500 crore spread over 5 years approved. US $ 4.5 billion as Japanese participation in the project. 5.8.4 Housing Sector * Various proposals to address the shortage of housing for low income groups in major cities and towns including allowing ECB for low cost housing projects and setting up of a credit guarantee trust fund etc.

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5.8.5 Fertilisers * Government has taken steps to finalise pricing and investment policies for urea to reduce India's import dependence in urea. 5.8.6 Textiles * Government has announced a financial package of `3,884 crore for waiver of loans of handloom weavers and their cooperative societies. * Two more mega handloom clusters, one to cover Prakasam and Guntur districts in Andhra Pradesh and another for Godda and neighbouring districts in Jharkhand to be set up. * Three Weaver's Service Centres one each in Mizoram, Nagaland and Jharkhand to be set up for providing technical support to poor handloom weavers. * '500 crore pilot scheme announced for promotion and application of Geo-textiles in the North Eastern Region. * A powerloom mega cluster to be set up in Ichalkaranji in Maharashtra with a budget allocation of `70 crore. 5.8.7 Micro, Small and Medium Enterprises * '5,000 crore India Opportunities Venture Fund to be set up with SIDBI. * To enable greater access to finance by Small and Medium Enterprises (SME), two SME exchanges launched in Mumbai recently. * Policy requiring Ministries and CPSEs to make a minimum of 20 per cent of their annual purchases from MSEs approved. Of this, 4 per cent earmarked for procurement from MSEs owned by SC/ST entrepreneurs.

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5.9 AGRICULTURE * Plan Outlay for Department of Agriculture and Co-operation increased by 18 per cent. * Outlay for Rashtriya Krishi Vikas Yojana (RKVY) increased to '9,217 crore in 2012-13. * Initiative of Bringing Green Revolution to Eastern India (BGREI) has resulted in increased production and productivity of paddy. Allocation for the scheme increased to '1,000 crore in 2012-13 from '400 crore in 2011-12. * '300 crore to Vidarbha Intensified Irrigation Development Programme under RKVY. * Remaining activities to be merged into following missions in Twelfth Plan: o National Food Security Mission o National Mission on Sustainable Agriculture including Micro Irrigation o National Mission on Oilseeds and Oil Palm o National Mission on Agricultural Extension and Technology o National Horticultural Mission o National Mission for Protein Supplement * '2,242 crore project launched with World Bank assistance to improve productivity in the dairy sector. '500 crore provided to broaden scope of production of fish to coastal aquaculture.

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5.9.1 Agriculture Credit * Target for agricultural credit raised by '1,00,000 crore to '5,75,000 crore in 201213. * Interest subvention scheme for providing short term crop loans to farmers at 7 per cent interest per annum to be continued in 2012-13. Additional subvention of 3 per cent available for prompt paying farmers. * Short term RRB credit refinance fund being set up to enhance the capacity of RRBs to disburse short term crop loans to small and marginal farmers. * Kisan Credit Card (KCC) Scheme to be modified to make KCC a smart card which could be used at ATMs. 5.9.2 Agricultural Research * A sum of '200 crore set aside for incentivising research with rewards. 5.9.3 Irrigation * Structural changes in Accelerated Irrigation Benefit Programme (AIBP) being made to maximise flow of benefit from investments in irrigation projects. * Allocation for AIBP in 2012-13 stepped up by 13 per cent to '14,242 crore. * Irrigation and Water Resource Finance Company being operationalised to mobilise large resources to fund irrigation projects. * A flood management project approved by Ganga Flood Control Commission at a cost of '439 crore for Kandi sub-division of Murshidabad District.

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5.9.4 National Mission on Food Processing * A new centrally sponsored scheme titled "National Mission on Food Processing" to be started in 2012-13 in co-operation with State Governments. * Steps taken to create additional food grain storage capacity in the country. 5.10 INCLUSION * Scheduled Castes and Tribal Sub Plans * Allocation for Scheduled Castes Sub Plan at '37,113 crore in BE 2012-13 represents an increase of 18 per cent over BE 2011-12. * Allocation for Tribal Sub Plan at '21,710 crore in BE 2012-13 represents an increase of 17.6 per cent. 5.10.1 Food Security * National Food Security Bill, 2011 is before Parliamentary Standing Committee. * A national information utility for computerisation of PDS is being created. To become operational by December, 2012. 5.10.2 Multi-sectoral Nutrition Augmentation Programme * A multi-sectoral programme to address maternal and child malnutrition in selected 200 high burden districts is being rolled out during 2012-13. * Allocation of '15,850 crore made for Integrated Child Development Service (ICDS) scheme, representing an increase of 58 per cent over BE 2011-12. * '11,937 crore allocated for National Programme of Mid Day Meals in schools. * An allocation of '750 crore proposed for Rajiv Gandhi Scheme for Empowerment of Adolescent Girls, SABLA.
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5.10.3 Rural Development and Panchayati Raj * Budgetary allocation for rural drinking water and sanitation increased from '11,000 crore to '14,000 crore representing an increase of over 27 per cent. * Allocation for PMGSY increased by 20 per cent to Rs.24,000 crore to improve connectivity. * Major initiative proposed to strengthen Panchayats through Rajiv Gandhi Panchayat Sashaktikaran Abhiyan. * Backward Regions Grant Fund scheme to continue in twelfth plan with enhanced allocation of '12,040 crore in 2012-13, representing an increase of 22 per cent over the BE 2011-12. * Rural Infrastructure Development Fund (RIDF) * Allocation under RIDF enhanced to '20,000 crore. '5,000 crore earmarked exclusively for creating warehousing facilities. 5.11 EDUCATION * For 2012-13, '25,555 crore provided for RTE-SSA representing an increase of 21.7 per cent over 2011-12. * 6,000 schools proposed to be set up at block level as model schools in Twelfth Plan. * '3,124 crore provided for Rashtriya Madhyamik Shiksha Abhiyan (RMSA) representing an increase of 29 per cent over BE 2011-12. * To ensure better flow of credit to students, a Credit Guarantee Fund proposed to be set up.
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5.12 HEALTH * No new case of polio reported in last one year. * Existing vaccine units to be modernised and new integrated vaccine unit to be set up in Chennai. * Scope of 'Accredited Social Health Activist' - 'ASHA' is being enlarged. This will also enhance their remuneration. * Allocation for NRHM proposed to be increased from '18,115 crore in 2011-12 to '20,822 crore in 2012-13. * National Urban Health Mission is being launched. 5.13 EMPLOYMENT AND SKILL DEVELOPMENT * MGNREGS has had a positive impact on livelihood security. * Need to bring about greater synergy between MGNREGA and agriculture and allied rural livelihoods. * Allocation of '3915 crore made for National Rural Livelihood Mission representing an increase of 34 per cent. * To ease access to bank credit, corpus for 'Women's SHG's Development Fund' enlarged. * Allocation for Prime Minister's Employment Generation Programme increased by 23 per cent to '1,276 crore in 2012-13. * Pradhan Mantri Swasthya Suraksha Yojana being expanded to cover upgradation of 7 more Government medical colleges.

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CHAPTER 6 INCOME TAX SLAB 2012-2013

India Income tax slabs 2012-2013 for General tax payers Income tax slab (in Rs.) 0 to 2,00,000 2,00,001 to 5,00,000 5,00,001 to 10,00,000 Above 10,00,000 Tax No tax 10% 20% 30%

India Income tax slabs 2012-2013 for Female tax payers

Income tax slab (in Rs.) 0 to 2,00,000 2,00,001 to 5,00,000 5,00,001 to 10,00,000 Above 10,00,000

Tax No tax 10% 20% 30%

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India Income tax slabs 2012-2013 for Senior citizens (Aged 60 years but less than 80 years) Income tax slab (in Rs.) 0 to 2,50,000 2,50,001 to 5,00,000 5,00,001 to 10,00,000 Above 10,00,000 Tax No tax 10% 20% 30%

India Income tax slabs 2012-2013 for very senior citizens (Aged 80 and above) Income tax slab (in Rs.) 0 to 5,00,000 5,00,001 to 10,00,000 Above 10,00,000 Tax No tax 20% 30%

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CHAPTER 7

CONCLUSION
Tax is one of the major sources of income for the government for carrying out various activities. Modern Tax reforms would certainly lead to greater access and simplicity with higher revenue to Government and benefits to people. Researcher in this project has describe the system of the taxation in India and comes to a conclusion that, though the structure of Indian taxation is vast & complicated, Government is coming up with new ideas and innovation like Direct Tax Code and Goods and Service Tax, giving benefits to women and senior citizen. After liberalization the revenue generated as tax has seen in multifold growth as large companies coming to India for business. Also, there is a huge cut down in the duties, while Imports. Exemptions and Deduction are allowed while computing the taxable income. Lots of benefits are given to the companies for setting up the business like tax holiday, low tax rate, etc. Different policies are being brought into consideration for simple and efficient working of the system which has Income generated from various sources. India with more than 65 countries has treaty for double tax avoidance. These signifies that the bilateral relationship of India with so many countries. Black Money, Corruption, Scams and Inflation are loopholes in the taxation system and creating huge loss in revenue of the country. Modern tax would step against it by making strict law, effective rules and regulations like penalties, fines or even jail.

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BIBLOGRAPHY BOOKS Richard Kohan, Mark Nash, and Brittney Saks in book Price Waterhouse Coopers Guide to Tax and Financial Planning, Published by John Wiley & Sons ......................... A.D.Mascarrenhas & P.A.Johnson in book Business Economics III Published by Manan Prakashan

NEWSPAPER Economic Times

WEBSITES o http://220.227.161.86/16791tsibf.pdf o http://www.indianembassy.org/taxation-system-in-india.php o http://www.tax4india.com/ o http://en.wikipedia.org/wiki/Income_tax_in_India o http://www.incometaxindia.gov.in/ o http://www.cbec.gov.in/ o http://www.gst4india.com o http://articles.timesofindia.indiatimes.com

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