On an average, every Indian pays a whole heap of taxes in his life. There is the income tax, the VAT that you pay when you are buying something, road tax, which needs to be paid when you are registering a vehicle you have bought with the government, property tax, stamp duty, and registration charges, which you pay when you own a house, and toll tax, extracted from you on highways. However, these are the taxes that we know. There are some taxes that we pay on a regular basis, but have no inkling that we may be paying them.
Service tax is the commonest form of tax that an Indian pays on a regular basis, but does not know about it. This tax is furnished to service providers for the service that they are giving us. The chain of taxation starts with the government asking the service providers to pay the tax first and then it gets transferred to us – the common consumers. Service taxes are applicable on a wide array of things and services such as:
- Telephone bills
- Broadband bills
- Dining at air-conditioned restaurants
- Tour operators
- Financial services
- Health clubs
At present the service tax being levied is pegged at around 14%.
All entertainment-related activities in India have to pay tax. This list is inclusive of – but not limited to – movies, broadcasting, commercial shows, cable services, and exhibitions. In this case, the entertainment complex, which is being taxed, passes on the burden to its end users. This tax may not be mentioned in the bills but they are literally the moving force behind the increase in ticket prices these days.
Sales tax is imposed on the sale of moveable goods. The Indian Government levies sales tax on goods that are being sold within states and in cases where the sale happens within a state, the respective state government collects the tax. There are three major categories of this tax – inter-state sale, sale within the state, and sale during import or export.
Excise duties are taken on goods that are being produced within India. It is also known as CENVAT or Central Value Added Tax and is just the opposite of custom duty. For people who manufacture or produce goods or hire labour in order to manufacture goods, excise duty has to be paid.
Custom Duty and Octroi
Custom duties are levied when goods are imported in India. Quite often, this duty has to be paid when the good is at the port of entry, much like the airports. This duty rate is dependent on the items that have been imported. Octroi is levied when goods enter a particular jurisdiction like a municipality so that they can be used, sold, or consumed. It can also be called an entry tax.
The corporate tax is levied on companies that operate in India. It is a yearly tax. The companies are divided into Indian and foreign for the purpose of taxation. The domestic companies need to pay approximately 30% along with education cess and surcharge in case their income exceeds INR 10 million. In cases, where the income is less than that the surcharge is not levied. In case of foreign companies, 40% along with education cess and surcharge has to be paid if income is greater than INR 10 million. If the income is less than that then the surcharge is not applied.
All the people working professionally in India pay this tax. The respective municipal corporations impose this tax and majority of the states charge the same. Everybody working in the private sector in India is liable to pay this tax. The employers deduct this every month and then submit the same to the municipal corporation. Just like the income tax, this is mandatory as well.
Education Cess and Surcharge
Education cess and surcharge are collected for educating poor people in the country. All the taxes paid in India have an in-built component of education cess, which amounts to 3% of the tax in question. Surcharge can be defined as an additional fee or tax on the present tax calculation and is levied on the existing tax amount.
So next time onwards, whenever you are paying a tax, just check that you are being charged right.