It refers to the system of income and expenditure of the government. To conduct this system fiscal policies are formatted and implemented by the government.

The prime objectives of the fiscal policy under the economy are:
1. To achieve full employment in the economy.
2. To maintain price stability.
3. To enhance income inequality.
4. To enhance economic growth.
5. To induce savings and investment in the economy.

In this way, the whole responsibility to maintain a viable fiscal stability in the economy goes the government. For the purpose govt. always try to increase its income through different sources and to reduce the income by suitable means, But it is not a easy task for a country like India, where the challenges of development are multi-dimensional.

TAXATION

Taxes have been the main source of income for the government upon which it relics. Hence, India has a huge and complicated structure of taxation. So, the basic concept of this system must be discussed.

Type of Taxes: There are many types of taxes according to different base, but broadly it is of two types:
1. Direct Taxes: Under such taxes there is no chance of shifting of the burden of tax, like income tax.
2. Indirect Tax: burden of tax partially or fully shifted to other person, like excise duty, custom duty etc.

On the another basis there are for types of taxes:
1. Progressive Taxes: Rate of tax increase as income increase.
2. Regressive Taxes: Rate of tax decreases as income increase.
3. Proportional Taxes: Rate of tax is fixed, irrespective of any increase or decrease in the income.
4. Degressive Taxes: Rate of tax which decreases when the amount being taxed increases.

Taxes imposed on goods and commodities are two types:
1. Specific Tax: When taxes are imposed on the basis of weight and quality fall under this category.
2. Ad valorem Tax: When taxes are imposed on the basis of value or price. In India custom Duty often imposed according to the value.

Government’s efforts towards brooding strengthening and simplification of tax base:
It is quite notable that since 1991, the economic reforms started there is a considerable increase in the volume of tax collection and the ratio of Direct taxes in the total tax revenue of the govt. has mounted revenue upto approx 56.6% in 2010-11 and tax-GDP ratio is being projected at 10.8%in 2010-11.

In this connection G’s following efforts could be mentioned:
1. Rationalisation of slabs.
2. Increasing number of services under service-tax brackets.
3. Introduction of new taxes - VAT, GTS, FBT, STT, etc.
4. Robust growth rate of the economy.
5. Income of indivisuals and companies have grown up.
6. Simplified and citizen-friendly procedures, like SARAL etc.
7. Inception of e-governance like e-filling of returns etc.

Discuss the following Taxes:
1. MODVAT
2. CENVAT
3. VAT
4. MAT
5. GTS & DTC
6. Service Tax
7. Tobin Tax
8. Winfall Tax
9. CVD
10. FBT etc.

Discuss the following concepts:
1. Impact and Incidence of Tax
2. Tax Slab
3. Tax Evasion
4. Cascading Effect
5. Laffer’s Curve
6. Fiscal Drag
7. Cess and Surcharge
8. Please Effect etc.

Courtesy: Mr. LS Mishra

Related Topics:

• Basic Economy

• Fiscal System

• Foreign Investment

• Monetary System

• Capital Market

• Inflation

• National Housing Bank - NHB