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Excise Duties:

VAT

VAT was first pioneered in France to eliminate the cascading effect of several levies from the stage of raw material to final product in the production process. It is now levied in more than 40 countries. The advantage of VAT over any other form of indirect tax is that it shifts the tax base towards the point of final consumption rather than first point sale, thereby ensuring `tax neutrality' of production decisions.

Since each producer up the value chain would like to claim the benefit of set-off, there is automatic pressure on the producers down the value chain to pay their tax. Moreover, since tax collection takes place in stages, evasion at any one stage is automatically compensated at a later stage.

The power to levy & collect certain taxes is vested in center, where as the revenues are distributed among states.

Tax Burden

Reason for the immense increase in tax burden during 1980s: -

1. Rise in government expenditure or interest payments
2. Subsidies
3. Inability of public enterprise to generate the required resources

Tax Reforms

The basic thrust of tax reforms that has been followed by the policy makers in India since 1991 are:-

Tax revenue of the central government

There are 4 main taxes:-

1. Personal Income Tax
2. Corporation Tax
3. Custom duties
4. Union excise duties

Tax revenue of state government

The principle tax revenue of state government is the share of the states in the central taxes and duties. For e.g. :-

• Land revenue
• Commercial taxes
• Stamp duties
• Registration fees
• State excise duties on alcohol and other narcotics

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* Contributed by: -
Prof. M. Guruprasad is Senior Faculty for Economics, Finance and Research, with AICAR Business School Raigad / Mumbai. He has more than 15 years of experience in research and educating / training management students. He was research scholar with the University of Mumbai. Worked as Executive in the Marketing research industry. Also Conducted Workshops and Training programmes. He has published articles in various industry magazines, newspapers and has initiated many discussions on academics.