SATHEE: Taxation System

Taxation System

1. Introduction

Tax: Compulsory financial charge imposed by Government to fund public expenditure.
Article 265 of the Indian Constitution: “No tax shall be levied or collected except by authority of law.”
Tax-to-GDP ratio of India (2023-24 RE): 11.1 % (OECD avg. ≈ 34 %).

2. Classification of Taxes

Type	Nature	Examples	Collection Level
Direct	Paid by person on whom levied	Income-tax, Wealth-tax (abolished 2015), Corporation tax	Central
Indirect	Burden shifted to consumer	GST, Customs, Excise (now subsumed)	Central + State
Progressive	Rate rises with income	Income-tax slabs	–
Regressive	Rate falls with income	Indirect taxes (in general)	–

3. Constitutional & Institutional Framework

Entry	List	Subject
82	Union List	Corporation tax, Income-tax (non-agri)
46	State List	Excise on liquor, VAT on petrol
279A	Constitution	GST Council (Constitutional body w.e.f. 1-7-2017)
280	Constitution	Finance Commission every 5 years

Key bodies

CBDT (Central Board of Direct Taxes) – 1963, under Revenue Dept., MoF
CBIC (Central Board of Indirect Taxes & Customs) – 2018 (re-named from CBEC)
GSTN – Goods & Services Tax Network (IT backbone; 24.4 % GoI stake)

4. Milestones & Important Dates

Date	Event
1860	1st Income-tax introduced by Sir James Wilson (Post-1857 revolt)
1886	Income-tax Act passed
1-4-1962	Current Income-tax Act comes into force
1-4-1997	Service tax born @ 5 % (now subsumed in GST)
1-4-2005	VAT replaces sales-tax in States
1-7-2017	GST launched (mid-night Parliament session)
1-2-2023	New income-tax regime becomes default (6-slabs, no 80C)
30-6-2023	50-cr GST returns filed milestone
1-1-2024	100-th GST Council meeting held

5. Direct Taxes at a Glance

Tax	FY 2024-25 (BE) ` Cr	% of total tax
Corporation tax	9,22,675	28.4
Income-tax (Personal)	10,37,205	31.9
Securities Transaction Tax (STT)	25,000	0.8
Total Direct	19,97,880	60.3

Highest personal tax rate – 30 % + 37 % surcharge (if income > ₹5 cr) ⇒ effective 42.74 % (highest in Asia).

6. Indirect Taxes after GST

GST structure

Slab	Key goods
0 %	Food-grains, milk, metro ride
5 %	Rail tickets, tea, spices
12 %	Phones, butter, juices
18 %	Standard rate (most items)
28 %	Luxury cars, tobacco + cess

GST Revenue (FY 23-24) – ₹20.18 lakh crore (monthly record ₹2.1 lakh cr in Apr-24).

Other indirect taxes

Basic Customs Duty (BCD) – FY 24-25 target ₹2.05 lakh cr
Compensation cess – earmarked for States till 2026 (extended)

7. Rail-specific Tax Facts

Railways exempted from GST on passenger fare; instead bear service tax (now integrated GST @ 5 % on AC class only).
Indian Railways Finance Corporation (IRFC) enjoys 100 % tax holiday under section 80-IA for infrastructure (till 31-3-2024).
Freight rebate: 5 % freight concession given by Railways if GST @ 12 % paid (to offset inverted duty).

8. Quick-Reference Tables

A. Income-tax Slabs (New Regime FY 2024-25)

Income (`)	Rate
0-3 lakh	Nil
3-6 lakh	5 %
6-9 lakh	10 %
9-12 lakh	15 %
12-15 lakh	20 %
>15 lakh	30 %

B. Corporate Tax Rate

Turnover	FY 2023-24	Note
< ₹400 cr	25 %	MAT 15 %
New manufacturing	15 %	Sec 115BAB (set up till 31-3-2024)

C. GST Council Quorum

Vote share
Centre	1/3
States together	2/3
Decision	75 % majority

9. One-liner Revision Bullets

Income-tax Day – 24 July (since 1860).
PAN – 10-digit alphanumeric; 5th character is surname of individual.
TDS – max deposit time 30 April for March month.
GSTIN – 15-digit; first 2 = State code.
E-Way bill must if goods > ₹50,000 (inter-state).
Customs duty governed by Customs Act 1962 & Tariff Act 1975.
Krishi Kalyan Cess & Swachh Bharat Cess subsumed into GST.
Faceless Assessment scheme launched 2019 to endInspector Raj.
Vivad se Vishwas Scheme 2020 – for direct-tax disputes.
Samadhan portal – for GST grievance redressal.

10. Practice MCQs

Who introduced the first Income-tax in India?
a) Lord Ripon b) Sir James Wilson c) Lord Mayo d) James Mill
Which Constitutional amendment created the GST Council?
a) 100th b) 101st c) 102nd d) 103rd
The highest GST slab is
a) 28 % b) 30 % c) 32 % d) 35 %
Which tax was abolished w.e.f. AY 2016-17?
a) Wealth-tax b) Gift-tax c) Estate-duty d) VAT
What is the effective peak personal income-tax rate (incl. surcharge) for income > ₹5 cr?
a) 30 % b) 36 % c) 42.74 % d) 39 %
The GST Network (GSTN) is classified as
a) Govt. company b) Private company c) Special-purpose PPP d) Statutory body
Which of the following is NOT subsumed under GST?
a) Service-tax b) VAT c) Basic Customs Duty d) Entertainment-tax
PAN is mandatory for transactions above
a) ₹1 lakh b) ₹2 lakh c) ₹50,000 d) ₹5 lakh
MAT rate under section 115JB is
a) 15 % b) 18.5 % c) 21 % d) 25 %
The 50th GST Council meeting (2023) was held in
a) New Delhi b) Mumbai c) Lucknow d) Bengaluru
Which Finance Commission recommended 41 % devolution to States?
a) 13th b) 14th c) 15th d) 12th
Customs duty collection target FY 24-25 (BE) is approx.
a) ₹1 lakh cr b) ₹1.5 lakh cr c) ₹2.05 lakh cr d) ₹3 lakh cr
The default tax regime for individuals from FY 23-24 is
a) Old regime b) New regime c) Presumptive d) Alternate
GST compensation cess to States is scheduled to end in
a) 2025 b) 2026 c) 2027 d) Already ended
Which State first implemented VAT in 2005?
a) Maharashtra b) Haryana c) Karnataka d) Tamil Nadu
The maximum TDS on rail ticket cash payment exceeding ₹50,000 is
a) 1 % b) 5 % c) 10 % d) 20 %
The STT rate on delivery equity is
a) 0.1 % buyer b) 0.1 % seller c) 0.025 % seller d) 0.01 % buyer
Which article provides for Finance Commission?
a) 280 b) 281 c) 282 d) 283
The minimum alternate tax (MAT) is levied on
a) Individuals b) HUF c) Companies d) Partnerships
GST day is celebrated on
a) 1 May b) 1 Jun c) 1 Jul d) 1 Aug

Show Answers

1-b, 2-b, 3-a, 4-a, 5-c, 6-c, 7-c, 8-b, 9-b, 10-a, 11-c, 12-c, 13-b, 14-b, 15-b, 16-a, 17-b, 18-a, 19-c, 20-c

Tip: Revise tables and one-liners daily; correlate rail exemptions under GST for maximum score in Railway GK sections.

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