what is tax

1. A tax is a mandatory financial charge or some other type of levy imposed
upon a taxpayer (an individual or other legal entity) by a governmental
organization in order to fund various public expenditures.
Direct tax
• Many jurisdictions tax the income of individuals and business entities,
including corporations. Generally, the tax is imposed on net profits from
business, net gains, and other income. Computation of income subject
to tax may be determined under accounting principles used in the
jurisdiction, which may be modified or replaced by tax law principles in
the jurisdiction.
• Most jurisdictions imposing an income tax treat capital gains as part of
income subject to tax. Capital gain is generally a gain on sale of capital
assets—that is, those assets not held for sale in the ordinary course of
business. Capital assets include personal assets in many jurisdictions.
Some jurisdictions provide preferential rates of tax or only partial
taxation for capital gains.

2. • Many countries provide publicly funded retirement or health care
systems.[6] In connection with these systems, the country typically
requires employers and/or employees to make compulsory payments.[7]
These payments are often computed by reference to wages or earnings
from self-employment. Tax rates are generally fixed.
• Property taxes are usually charged on a recurrent basis (e.g., yearly). A
common type of property tax is an annual charge on the ownership of
real estate, where the tax base is the estimated value of the property.
• Some countries' governments will require declaration of the tax payers'
balance sheet (assets and liabilities), and from that exact a tax on net
worth (assets minus liabilities), as a percentage of the net worth, or a
percentage of the net worth exceeding a certain level. The tax may be
levied on "natural" or legal "persons".

3. • In the United States, the term "direct tax" has acquired specific meaning
under constitutional law: a direct tax is a tax on property "by reason of its
ownership"[4] (such as an ordinary real estate property tax imposed on
the person owning the property as of January 1 of each year) as well as a
capitation (a "tax per head").

4. Indirect tax
• An indirect tax may increase the price of a good to raise the price of the
products for the consumers
• Excise duty is a governmental tax meant for producers and manufacturers
on certain goods.
• Manufacturers are considered to be:
1. Entities who manufacture goods themselves.
2. Entities who outsource manufacturing, but manufacturing takes
place from their name
• The most common example if an indirect tax is import duties. The duty is
paid by the importer of a good at the time it enters the country. If the
importer goes on to resell the good to a consumer, the cost of the duty in
effect is hidden in the price that the consumer pays. The consumer is likely
to be unaware of this, but he will nonetheless be indirectly paying the
import duty.

5. Current taxation system (GST)
• The goods and services tax (GST) is an indirect federal sales tax that is
applied to the cost of certain goods and services.
• France was the first country to implement the GST in 1954, and since then an
estimated 160 countries have adopted this tax system in some form or
another.
• The business adds the GST to the price of the product; a customer who buys
the product pays the sales price plus GST; and the GST portion is collected by
the business or seller and forwarded to the government.
• The main objective of incorporating the GST is to eliminate tax on tax i.e.
double taxation which cascades from the manufacturing level to the
consumption level.
• HSN (Harmonized System of Nomenclature) is an 8-digit code for identifying
the applicable rate of GST on different products as per CGST rules.
• India adopted a dual GST model, meaning that taxation is administered by
both the Union and State Governments. Transactions made within a single
state are levied with Central GST (CGST) by the Central Government and
State GST (SGST) by the State governments.

6. ADDITIONAL INFORMATION
• In last assessment year, there were only 5.5 lakh people, out of the 3.65 crore
individuals who filed returns, paid income tax of more than Rs 5 lakh and
accounted for 57 per cent of the total tax collection. This essentially means
that only 1.5 per cent of those filing tax returns (3.65 crore) were contributing
to 57 per cent of tax kitty. The Prime Minister wanted to address this issue by
bringing the unaccounted money into banking channel.
• After the overhaul of indirect taxes, the government is now gearing up for the
review of direct taxes, which have been in force since 1961. Kicking off the
process, the government has set up a seven-member task force to draft a new
direct taxes law.
• In, 1991, the Government set up the Tax Reforms Committee under the
Chairmanship of Raja J. Chelliah to examine the then tax structure of the
country and suggest appropriate changes therein. In its report submitted to
the Government in January 1993.
(i) To remove the present defects, and
(ii) To make it more productive (i.e., to make it more efficient from the
revenue-raising point of view).