Taxes Belonging To The States Exclusively

India has a well-structured taxation system. Taxes are the primary source of income for a country. According to Article 256 of the Indian constitution, the tax should be collected only by the government’s authority, not by any ordinary citizen. The taxation system of India consists of 3 federal parts. The central government, the state government, and the local municipal corporation complete this structure. The government cannot levy any tax until it is passed as a law. The money collected as tax is spent on various projects for the nation’s development. Entertainment tax is considered a valuable tax collection system as it helps earn a huge amount of revenue for the nation.

Why are Taxes Important?

The government imposes taxes to increase the revenue for government expenditure. The important purpose of taxation is to distinguish between the goals of resource allocation, economic development, and income redistribution. Every state has a well-structured tax system that includes both progressive and proportional taxation based on different factors determined by the state governments. Direct taxes display the importance of taxation by reducing income equalities and a progressive structure. In contrast, Indirect taxes are automatic functions that accompany the buying and selling of goods and services across the states. 

Types of Exclusive State Taxes and their Significance

State taxes are the taxes that are levied, collected, and imposed by the state government authority of any country. The state taxation system includes various tax collection systems which differ from state to state. Professional tax, Entertainment Tax, Road tax, and Vat are some of the exclusive taxes determined by states. GST on movie tickets and GST on entertainment both play a significant role in the state taxation system to earn revenue for the development of states. Below are the taxes that are exclusively levied by the states:

• Sales tax and VAT: Before 2005, the taxes imposed by the State Government on the sale of goods were included in Sale taxes. After 2005, the VAT system was introduced for the sale of goods. The State authority decides the VAT and collects it from the merchants by transferring tax onto the consumers. The VAT is decided by the categories of goods, price of products, and their distribution or sale to the end consumer. Vat is generally implemented as a destination-based tax where the tax rate varies on the location and is applied to the sales price. 

• Professional Tax: It is a type of exclusive tax, levied, determined and collected by the State Government. It is mainly imposed on the citizens working for working professionals in different sectors such as IT, Medical Engineering, etc. Therefore, it depends on the annual income earned by every individual working for these sectors. 

• Entertainment Tax: Entertainment tax is a kind of exclusive tax levied by the state government as a duty fee for all sources of entertainment activities. These include sports events, movie theatres, amusement parks, etc. For example, while visiting a movie theatre, the GST on movie tickets that we see is the entertainment tax that we pay to the state government. Some factors that decide the amount of GST of entertainment tax to be paid as tax are the type of entertainment, seating capacity, etc.

• Motor Vehicles tax: It is a kind of exclusive tax that citizens of a state pay when they buy a motor vehicle, be it a two-wheeler or four-wheeler. The amount for this depends upon the type of vehicle purchased, the seating capacity of the same, etc. This is also called road tax which can be paid either every year or it can be paid every 5 years as a collective amount.

• Luxury tax: It is also a part of the exclusive State tax charged by the hotels and establishments providing accommodation. This tax is calculated depending on the prices of rooms determined by the establishments and the amount of tax charged by the State Government. In addition, some state governments have imposed luxury taxes on the facilities used by citizens for relaxation and recreation purposes, such as gyms and banquet halls, etc.
• Stamp Duty: Stamp Duty is a part of the exclusive tax levied on official documents like marriage registration or any document related to property etc. Stamp Duty is paid in two ways, the first is using the document with a stamp embossed on the top of the paper, and the other is attaching a stamp to an official document. Using a Stamp on any official document means stamp duty is paid on them, which can be admitted as evidence in court.

Conclusion

According to the article written above, we have discussed some of the significant taxes imposed by the State Government. Taxes form an integral form of government that accelerates welfare, improvement, and industrialization. Among the above, entertainment tax, sales tax, and motor vehicles tax are the most important of the lot.