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The Impact of Taxation System on Economic Growth in India

Author(s):

Monika Ghotia , Choudhary Devi Lal University Sirsa, Haryana; Devender Kumar, Jaipur National University Jaipur, Rajasthan

Keywords:

Economic Growth in India, GST, VAT

Abstract

Indian taxing system is one of the most important sources of revenue to the Government and at the same time one of the deciding parameter for economic growth. Whereas direct tax impacts directly the disposable income, the indirect tax impacts the prices of goods and services in the market. The basic objective of this article is to evaluate the impact of both direct and indirect taxes on economic growth of India. Today Indian taxing system is going a revolutionary change owing to spreading the wings of Indian business into global market. Indian Government is paying its full attention to liberalize the taxing system and at the same time closing the loopholes to disable the intruders to evade the taxing system so as to enlarge the revenue to Government exchequer and flourish the overall business scene. Broadly taxing system may be classified into three parts: - Progressive taxation implies a taxing system where tax rate increases with increase in income, thus if a person has higher income, he will bear more tax burden due to increased tax rate than person having lesser income. - Regressive taxation means a taxing system where tax rate reduces with increase in income and thus a person having lesser income faces lesser tax burden due to facing lesser tax rates. - Proportion tax means a taxing system of charging tax on a fixed proportion irrespective of level of amount on which tax is to be levied. Thus, the same tax rate applies to different persons having different taxable amounts. Tax may be levied on natural persons like individual, Hindu undivided family artificial entities like Firm, association of persons, company, society etc. and also on goods and services. Thus, another classification of tax we found into direct tax and indirect tax. - Direct tax means a type of tax which is paid by a person directly to the Government. For example income tax and wealth tax in India. - Indirect tax means tax on goods and services which are paid by a person to the producer, seller or service provider who is liable to pay the same to the account of Government. For example customs duty, excise duty, VAT, service tax, entertainment tax etc. in India. Now a modern system of taxing all goods and services ― after introducing goods and services tax(GST), It replaced all existing enactments relating to goods and services.

Other Details

Paper ID: IJSRDV7I20620
Published in: Volume : 7, Issue : 2
Publication Date: 01/05/2019
Page(s): 154-156

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