ARTICLES ON GST INDIA

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TAX & TAX LEVY : WHAT THEY MEAN

What is tax :  Following important observations have been made by the Honorable Supreme Court in its judgment in the case, the Commissioner, Hindu Religious Endowments, Madras vs. Sri Lakshmindra Tirtha Swamiar of Sri Shirpur Mutt., Judgment dated April 16, 1954:


"A neat definition of what "tax" means has been given by Latham C. J. of the High Court of Australia, in Matthews v. Chicory Marketing Board. A tax", according to the learned Chief Justice, "is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered". This definition brings out, in our opinion, the esential characteristics of a tax as distinguished from other forms of imposition which, in a general sense, are included within it. It is said that the essence of taxation is compulsion, that is to say, it is imposed under statutory power without the taxpayer’s consent and the payment is enforced by law. The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax.This is expressed by saying that the levy of tax is for the purposes of general revenue, which when collected revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the taxpayer and the public authority. Another feature of taxation it; that as it is a part of the common burden, the quantum of imposition upon the taxpayer depends generally upon his capacity to pay."

     In view of the above, the Hon'ble Apex Court has held as follows:
"A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered."

      In the judgment, the Honorable Court has explained that -
(i) tax is imposed without the taxpayer's consent and the payment is enforced by law;
(ii) tax is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax;
(iii) tax levy is for the purpose of general revenue, which when collected revenues the State; and
(iv) tax is a common burden, the quantum of imposition upon the taxpayer depends generally upon his capacity to pay.

     Tax is levied to augment the revenue of the State. Any amount of tax levied when collected from the taxpayer or deposited by the taxpayer voluntarily becomes revenue of the State. Any amount, either deposited by the taxpayer voluntarily or recovered from the taxpayer, validly levied as tax, cannot be refund to the taxpayer or any other individual. Refund of any amount, paid by a taxpayer or recovered from from him, can be allowed to taxpayer only if (i) such amount is not leviable as tax; and (ii) burden of such amount has not been paased on any other person.

What is tax levy  Article 265 of the Constitution of India runs as follows:
"265.  Taxes not to be imposed save by authority of law. -  No tax shall be levied or collected except by authority of law."

     In view of this Article, a tax can be levied under a law. In the Constitution, law making powers have been assigned to State Legislatures in matters in respect of which Constitution gives powers to State Legislatures and by the Union in matters in respect of which the Constitution gives law making powers to the Union. Therefore, a tax can be levied under the law enacted by the State Legislature or by the Parliament.
      Any law providing for levy of tax has following three essential stages:
(i) Declaration of tax levy;
(ii)  Assessment of tax levy; and
(iii) Recovery of tax levy.
      In respect of tax levy or levy of tax, the honorable Supreme Court, in its judgment in the case Govind Saran Ganga Saran vs Commissioner Of Sales Tax And Ors, judgment dated 26 April, 1985, has held as follows:
"The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If these components are not clearly and definitely ascertainable it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity."
     In view of the said judgment, declaration of levy of tax requires declaration of following things:
(i)  event like sale, transfer, supply, manufacture, entry, etc. or any property, which is to be taxed;
(ii) person on whom tax will be levied;
(iii) rate of tax; and
(iv) measure or value to which rate of tax will be applied.
     If any of the aforesaid four things has not been declared then declaration of levy of tax is incomplete and invalid.

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