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The Tax System and GST - Short Trick

Direct and indirect tax, income tax, corporate tax, GST’s structure, the Council and the rates — one sentence each

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How to read
  • Guru Ram Each coloured word = one name in the list, shown below in the same colour
  • Panda Two colours in one word = two names
  • ➜ Order the numbered order matters · ⇄ Any order no order
1

Kinds of Tax and Rates

Direct against indirect, the three rate patterns, and cess against surcharge.

Pairs

Direct against indirect tax

2 sentences

Dinesh took the hit himself.

Direct tax=Impact and incidence on the same person — the burden cannot be shifted · income tax, corporate tax · narrows inequality

Indu passed the load on.

Indirect tax=The burden shifts — the shopkeeper deposits it, the customer pays · GST, customs duty · widens inequality

Impact = on whom the tax is first charged · incidence = on whom the real burden finally lands.

Pairs

Three rate patterns

3 sentences

A programmer earns more and pays a higher rate.

Progressive tax=The higher the income, the higher the rate · India’s income tax (10% at ₹5 lakh, 30% at ₹30 lakh)

Every proper samosa costs the same.

Proportional tax=One rate whatever the income · a single GST rate on every buyer

Regular food tax hits a small purse hardest.

Regressive tax=The lower the income, the bigger the share lost to tax · the same tax on everyday food

The GST rate is proportional but its effect is regressive — as with most indirect taxes.

Pairs

Cess against surcharge

2 sentences

Celebration money has a fixed purpose.

Cess=Purpose fixed in advance — health and education cess, road cess

Suresh can spend it anywhere.

Surcharge=No fixed purpose · on high earners or big companies

Both are temporary · neither is counted in the Finance Commission’s sharing — the whole amount stays with the Centre.

2

Who Levies Which Tax

The states’ direct taxes, the central taxes folded into GST, and what stayed outside.

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3

Income Tax — Old against New

What each regime allows, the reform committees and the new Income-tax Act.

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4

Corporate Tax, Capital Gains and Abolished Taxes

Company tax rates, MAT, capital gains and seven direct taxes that were withdrawn.

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5

GST — History, Structure and Registration

Where GST came from, which tax applies inside a state and between states, and the registration limits.

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6

The GST Council and the Rates

The Council’s vote maths, the GST 2.0 rates and dates, the compensation cess and input tax credit.

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7

Tax Terms

GAAR, the DTC, Tobin and Pigouvian taxes, tax havens, BEPS and other exam terms.

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Read the full chapter for the complete notes — a trick helps you remember the list; understanding comes from the notes.