Economy / Taxation / Broadening Tax Base.
Broadening Tax Base.
- Introduction of Service Tax (1994):
- In 1994, the government introduced service tax, expanding the tax base to include services, thereby capturing a broader range of economic activities.
- Securities Transaction Tax (STT):
- The implementation of Securities Transaction Tax (STT) contributed to broadening the tax base by taxing transactions in the securities market.
- Commodities Transaction Tax (CTT):
- The introduction of Commodities Transaction Tax (CTT) expanded the tax base to cover transactions in the commodities market.
- Fringe Benefit Tax (FBT):
- Fringe Benefit Tax (FBT) was introduced to tax non-salary benefits provided by employers to employees, further broadening the tax base.
- Minimum Alternative Tax (MAT):
- Minimum Alternative Tax (MAT) was implemented to ensure that companies paying low or no taxes due to various exemptions contribute to the tax base.
- General Anti-Avoidance Rule (GAAR):
- The introduction of General Anti-Avoidance Rule (GAAR) aimed at preventing tax avoidance and ensuring a broader tax base.
- Demonetization:
- Demonetization in 2016 played a role in bringing undisclosed income into the formal economy, contributing to the broadening of the tax base.
- Transfer Pricing and Advance Pricing Agreements (APAs):
- Measures related to transfer pricing and Advance Pricing Agreements (APAs) aimed at ensuring fair taxation on international transactions and expanding the tax base.
- Expansion of TDS Provisions:
- The coverage of provisions related to Tax Deduction at Source (TDS) was expanded to include more transactions, increasing the number of individuals covered under the tax net.
- Compulsory PAN Quoting:
- Quoting of Permanent Account Number (PAN) was made compulsory for various transactions, facilitating the inclusion of more individuals in the tax net.
- Google Tax and Angel Tax:
- Measures like Google Tax and Angel Tax targeted specific areas to ensure that income generated through digital advertising and startup funding is appropriately taxed.
Overall Impact:
- The various measures undertaken by the government have contributed to broadening the tax base in India, covering a wider range of economic activities and ensuring greater tax compliance.
