Sovereign right to taxation

Sovereign right to taxation

Subject: Polity

Context : Seven years after coming to power, the BJP-led government recently decided to withdraw the retrospective taxation amendment in the I-T Act introduced in March 2012, by Pranab Mukherjee, the then Finance Minister in the UPA government.

Concept:

Sovereign right to taxation

• In India, the Constitution gives the government the right to levy taxes on individuals and organisations, but makes it clear that no one has the right to levy or charge taxes except by the authority of law.
• Any tax being charged has to be backed by a law passed by the legislature or Parliament.
• A document on the Ministry of Statistics and Programme Implementation website quotes the definition of tax as a “pecuniary burden laid upon individuals or property owners to support the government, a payment exacted by legislative authority”, and that a tax “is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority”.
• Taxes in India come under a three-tier system based on the Central, State and local governments, and the Seventh Schedule of the Constitution puts separate heads of taxation under the Union and State list.
• There is no separate head under the Concurrent list, meaning Union and the States have no concurrent power of taxation, as per the document.

Constitutional Provisions Regarding Taxation

• Article 265 provides that no tax shall be levied or collected except by the authority of law .No tax can be imposed by an executive order.
• Levy of duty or tax: Article 268 – duties levied by union but collected and appropriated by states. Example :stamps duties mentioned in union list shall be levied by central government but collected by the state
• Article 269 deals with taxes levied and collected by the union and assigned to the states that is money collected will not go to the consolidated fund but used and distributed among state in accordance with principle formulated by the parliament.
• Article 270 deals with the tax levied and collected by the state example: taxes and duties referred in the union list shall be distributed.

Grants in Aid:

• Article 273 grants in aid will be given to the states of Assam, Bihar and West Bengal in lieu of export of duty on the jute products.
• Article 275 empowers the parliament to make such grants.
• Article 275 empowers the parliament to make such grants.
• Article 282 –both the union and the state makes grant for any public purpose
• Article 274 deals with the prior recommendations of the president is required to bills affecting taxation in which states are interested

Taxes For The Purpose of State:

• Articles 276 and 277 are saving provisions .Article 276 empowers the state to impose taxes on profession, trades, callings and employment for the benefit of state or municipality, district board etc. But the provision of Article 277 does not extend to taxes levied under a law passed after the constitution came into force.

Taxes For The Purpose of the Union:

• Article 271 provides that if parliament at any any time increases any of the duties or taxes mentioned in Article 269 and 270 except Article 246A by imposing a surcharge.
• At last Article 279 deals with the calculation of net proceeds and Article 284 deals with custody of suitor’s deposits and other moneys received by public servants and courts. These are the constitutional provisions regarding taxation embodied in the constitution.