Indian taxation system is highly organized and well developed. The entire tax structure of the country is managed by a three-tier federal arrangement, comprising of the Union Government, the respective State Governments and the various Local Bodies. Keeping in accord with the provisions of the Indian Constitution, the authority and power to levy various taxes and duties is distributed amongst these three governmental tiers, in a planned manner. The Union Government holds power to charge taxes like Income Tax (except on agricultural income), Custom Duties, Central Excise and Service Tax.
On the other hand, the State Governments are empowered to levy taxes like VAT (Value Added Tax), Sales Tax, (taxes on intra-state sale of goods in states where VAT is not in force), Stamp Duty (duty on transfer of property), Land Revenue (tax on land), State Excise (duty on manufacture of alcohol), and Tax on Professions. State Governments can also impose taxes on various agriculture incomes. Since April 1, 2005, most of the State Governments in the country have substituted Sales Tax with Value Added Tax.
The various Local Bodies of the country also have their own command as far as the taxation structure is concerned. They are authorized to levy Tax on Properties (buildings, etc.), Octroi (tax on entry of goods for use within areas of the Local Bodies), Tax on Markets and also Taxes on Utilities like drainage, water supply and the like. From the last decade, the taxation structure in India has witnessed major reforms and amendments. Tax Laws have been rationalized and the tax rates have also been streamlined to a great extent, leading to better enforcement, simplified payment modes and fair play.
