Wednesday, April 8, 2015

Constitutional Provision Governing Taxation in India

Constitutional Provision Governing Taxation in India

Article 246 ( Seventh Schedule) of the Indian Constitution contains the legislative powers (including taxation) of the Union Government and the State Governments. It contains the following 3 lists covering the various subjects :
List I—Central List.               It contains the areas in respect of which only the parliament i.e., Central Government can make laws (including taxation laws.)
List II—State List.                 It contains the areas in respect of which only the State Legislature can make laws (including taxation laws).
List III—Concurrent List.      It contains the areas in respect of which both the Parliament and the State Legislature can make laws concurrently. It is important to note that this list does not specify any law relating to taxation. In other words, there is no head of taxation under the concurrent list and hence Union and the State have no concurrent power of taxation.                     
SEVENTH SCHEDULE
(Article 246)
List 1—UnionlCentral List (14 Heads of Taxation)
1.         Taxes on income other than agricultural income: [Entry 82] [Income Tax Act 1961]
2.         Duties of customs including export duties; [Entry 83] [Customs Act 1962]
3.         Duties of excise on tobacco and other goods manufactured or produced in India except (i) alcoholic liquor for human consumption, and (ii) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in (ii); [Entry 841 [Central Excise Act 1944]
4.         Corporation Tax; [Entry 851
5.         Taxes on capital value of assets, exclusive of agricultural land, of individuals and companies, taxes on capital of companies; [Entry 86]
6.         Estate duty in respect of property other than agricultural land; [Entry 87]
7.         Duties in respect of succession to property other than agricultural land; [Entry 88]
8.         Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freight; [Entry 89]
9.         Taxes other than stamp duties on transactions in stock exchanges and futures markets; [Entry 901
10.       Rate of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of landing, letter of credit, policies of insurance, transfer of shares, debentures, proxies and receipts. [Entry 911
11.       Taxes on the sale or purchase of newspapers and on advertisements published therein; [Entry 92]
12.       Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce; [Entry 92 A] [Central Sales Tax Act 1957]
13.       Taxes on the consignment of goods in the course of inter-State trade or commerce. [Entry 92B]
14.       All residuary types of taxes not listed in any of the three lists of Seventh Schedule of Indian Constitution; [Entry 92 C] for e.g. Service Tax.
Note : The Department of Revenue under the Government of India’s Finance Ministry is solely responsible for levy and collection of above union taxes.
List—II (State List) (19 Heads of Taxation)
The nineteen heads List-Il of Seventh Schedule of the Indian Constitution covered under State taxation, on which State Legislative enacts the taxation law, are as under
1.         Land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights, and alienation of revenues;
2.         Taxes on agricultural income; [Entry 46)
3.         Duties in respect of succession to agricultural income; [Entry 47]
4.         Estate Duty in respect of agricultural land; [Entry 48]
5.         Taxes on lands and buildings; [Entry 491
6.         Taxes on mineral rights; [Entry 501
7.         Duties of excise for following goods manufactured or produced within the State (i) alcoholic liquors for human consumption, and (ii) opium, Indian hemp and other narcotic drugs and narcotics; [Entry 511
8.         Taxes on entry of goods into a local area for consumption, use or sale therein [Entry 52]
9.         Taxes on the consumption or sale of electricity; [Entry 53]
10.       Taxes on the sale or purchase of goods other than news papers; [Entry 54]
11.       Taxes on advertisements other than advertisements published in newspapers and advertisements broadcast by radio or television; [Entry 55]
12.       Taxes on goods and passengers carried by roads or on in land waterways; [Entry 56]
13.       Taxes on vehicles suitable for use on roads; [Entry 57]
14.       Taxes on animals and boats; [Entry 58]
15.       Tolls; [Entry 59]
16.       Taxes on profession, trades, callings and employments; [Entry 60]
17.       Capitation taxes; [Entry 61]
18.       Taxes on luxuries, including taxes on entertainments amusements, betting and gambling; [Entry 62]
19.       Stamp duty in respect of documents other than those specified in the provisions of List I.
List—III (Concurrent List)
No Head of Taxation