Economic Legislation

8/3/2019 Economic Legislation

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Economic LegislationsEconomic Legislations


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Economic LegislationEconomic Legislation

Any policy has two fundamental aspects-

Formulation

Implementation

The bridge between the two is provided bylegislations.

Planners, legislators and executors have act inconcert so as to make the policy discussions mustbe followed by a few illustrative examples ofeconomic legislations, so that the analyst mayunderstand particularly the interaction betweenthe economic and politico-legal environment of acountry.


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Monopolies and Restrictive Trade Practices ActMonopolies and Restrictive Trade Practices Act

( MRTP) 1969( MRTP) 1969

The MRTP Act enacted in December 1969and brought into force with effect from June1 1970

Preamble An act to provide that the operation of theeconomic system does not result in theconcentration of economic power to the

detriment for the control of monopolies, forthe prohibition of monopolistic andrestrictive trade practices and mattersconnected there with or incidental there to


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ObjectivesObjectives

It has three objectives To control and regulate the concentration ofeconomic power in a few hands of businessand industry. ( Ch. III of the Act)

To control monopolies and monopolistictrade practices. (Ch. IV)

To prohibit restrictive trade practices unless

any one of them can be justified in thepublic interest. (CH. V and VI)


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Applicability of the ActApplicability of the Act

Prior to the notification dated 27/09/91 theMRTP Act was not applicable to-

Undertakings owned or controlled by Govt.

Trade unions and other associations ofworkmen

Financial Institutions

but after the above notification the act was

made applicable to all undertakings andfinancial institutions except threeundertakings-


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Applicability of the ActApplicability of the Act

Owned or controlled by a govt. company orthe govt, engaged in the production of armsand ammunition and allied items of defense

equipments, defense aircraft atomic energyetc.

Industry units under the ministry of finance.

Trade unions and other association ofworkmen.


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Monopolistic Trade PracticeMonopolistic Trade Practice

Under the MRTP Act an MTP defined as a tradepractice which had any of the followingeffects-

Limiting or controlling or distribution of goods

or services thereby maintaining their price atunreasonable.

Limiting technical developments or goods or

capital investment or allowing the quality orgoods and services to deteriorate.

Unreasonably preventing of restrictingcompetition.


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Monopolistic Trade PracticeMonopolistic Trade Practice

Unreasonably increasing cost or charge forservices.

Unreasonably increasing prices of goods orservices.

Unreasonably increasing profits onproduction.

resorting to unfair or deceptive means toreduce or prevent competition in goods orservices


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Restrictive trade PracticesRestrictive trade Practices

An RTP under the Act had defined to be theone that had the effect of preventing,distorting or restricting competition in anymanner. An RTP in particular had the effect

of : Obstructing the flow of capital or resourcesfor production.

Imposing unjustified costs or restrictions onconsumers with regard to the availability ofgood and services by manipulating prices orconditions of delivery or supplies to market.


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Unfair trade PracticeUnfair trade Practice

Section 36A of the Act provides that that UTPmeans a trade practice for the purpose ofpromoting sale, use or supply of any goods orfor the provision of any services adopts any

unfair method or deceptive practices. Falsely represents that the goods are of aparticular standard, quality, quantity, style ormodel.

Falsely represents ant rebuilt second hand,renovated, reconditioned or old goods as newgoods.

Represents that goods or services have


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Unfair trade PracticeUnfair trade Practice

Makes a false or misleading representationconcerning the need for or the usefulness ofany goods or services.

Misleads the public concerning the price at

which a product or like products or serviceshave been or are ordinarily sold or provided.


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Control of MTPControl of MTP

The control over monopolistic trade practice isdone through the mechanism of inquiry andsuitable orders to remove the undesirable effectsof a MTP

The MRTP commission could make an enquiry onthe basis of any of the following

A reference received from the central Govt.

An application received from DGIR

The commissions own information or knowledge.

The commission could make an enquiry andsubmit report to the central govt. which alonehad the power to take decision on such practice.

The Govt. can cancel whole agreement containing


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Control of MTPControl of MTP

The govt order in MTP had to be completedwithin 30 days and DGIR had to be reportsuch compliance with in 90 days of theissue of orders.


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Control Mechanism for RTPControl Mechanism for RTP

All the agreements containing any of therestrictive clauses to be registered with theDGIR.

The MRTP commission could initiate an

enquiry into a restrictive trade practice on thebasis of any of the following-

A complaint received from consumer/

consumer organization. A reference made by the central or stategovt.

Its knowledge or information


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The commission, in its enquiry, heard all theparties concerned and its decisions fell into oneof the following categories-

The practice might be allowed if it was found not

prejudicial to the public interest. cease and desist order might be passed if it was

found prejudicial to the public interest.

The agreement might be modified as per orders

of the commission.Proceedings may be dropped if the party on its

own promised to discontinue, or not to repeat thesuch practice in future.


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Control UTPControl UTP

UTP could be passed only if it was prejudicial topublic interest.

A practice which was specifically authorized bysome existing laws, not actionable under MRTP

Act. MRTP commission will order DGIR to make a

preliminary enquiry.

After the MRTP commission investigation,

commission can order compensation for loss ordamage to the affected person or the party

Directly pecuniary

Indirectly pecuniary

Non - ecuniar


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Amendments to the MRPT Act (1991)Amendments to the MRPT Act (1991)

MRTP Act was amended in December 1991 with aview to make Indian industry more competitivein abroad and retain only those provisions of theact which were essential to control monopolistic

and unfair trade practicesThe MRTP amendment 1991 could be studied

under two heads-

Deletions from the Act

Elimination of pre-entry restrictions. removal of the restrictions on acquisition and

transfer of shares.


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Amendments to the Act Enlargement of definition of goods

Enlargement of definition of service

preliminary investigation by DGIR made optional

Penalty provisions made more stringent

New definition of dominant undertaking


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Industrial LicensingIndustrial Licensing

A license is a written permission issued by thecentral govt. to an industrial undertaking statingsuch details as the location, the article to bemanufactured, production capacity and other

relevant particularsObjectivesTo limit industrial capacity

To direct investment in industries according topriorities.

to regulate location of industrial units so as tosecure balanced regional development.

Prevent monopoly and concentration of


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Control UTPControl UTP

to protect small scale industries to encourage new entrepreneurs to start

industrial units.

Industrial licensing is an instrument to canalize

the limited resources of an economy in the mostproductive way for industrialization


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Legislative Frame work for licensingLegislative Frame work for licensing

The legislative frame work for industrial licensingis provided in the Industrial ( development andRegulation) Act 1951


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Industrial (Development and Regulation ) Act 1951Industrial (Development and Regulation ) Act 1951

Consistent with the industrial policy resolution,the industrial ( Development and regulation) Act1951

Was passed which came into force on May 8

1952.ObjectivesTo provide the central govt. with means to

implement their industrial policy.

To take necessary steps for the development ofindustries.

To regulate the pattern and direction of industrial

development.


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Application of the ACT ( Scope)Application of the ACT ( Scope)

The Act applies to the whole of India includingJammu and Kashmir.

Act applies to industrial undertakingmanufacturing any of the articles mentioned in

the first schedule . The Act is implemented through the Ministry of

Industry.


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Provisions of the ActProvisions of the Act

Classified into three broad categories Preventive Provisions

Curative Provisions

Creative Provisions


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1. Preventive Provisions1. Preventive Provisions

A) Registration and licensing Section 10 provides that the owner of every

industrial undertaking shall get his undertakingregistered with in a specified period.

Licensing is required for following case- Licensing of new undertaking (11)

Production of new articles (11A)

license for expansion (13)License for shifting location (13)

In the year 1991 (July 25 ), registration andlicensing was abolished, except for 18 specified

industries.


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B) Investigation Section 15 empowers the govt. to cause an

investigation into an industrial undertaking on thehappening of

Deterioration in the quality of product. Rise in the price of article

Misutilisation of resources

Fall in production


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C) Revocation of Registration and license Section 10 empowers the govt. to revoke the

registration when-

It was obtained by misrepresentation

Registration has become useless or ineffective


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2. Curative measures2. Curative measures

A) Take Over of managementThe power of control entrusted to the govt. to

take over of the management of whole or anypart of an industrial undertaking which fails to

comply any of the directions of Act. (section 18A)B) Control of Supply and price In order to secure equitable distribution and

availability of any article or class of articles, govt.

empowered by the act to control its supply,distribution and price


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3. Creative Provisions3. Creative Provisions

A) Development councils Govt. can establish councils for any scheduled

industry or group of scheduled industriesconsisting of members representing the interests

of owners, employees, consumers etc. andpersons having special knowledge of industries.

B) Levy and collection of cess Section 9 of the act provides govt. to levy and

collect a cess for purpose of this act on all goodsand services of scheduled industry.


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3. Creative Provisions3. Creative Provisions

C) Central Advisory councilThe empowers for the establishment, by the govt.

of central advisory council consisting ofrepresentatives of the owners of industrial

undertakings, employees, consumers, suppliers,etc. for the purpose of advising govt. on mattersconcerning the development of the industries.


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Foreign Exchange Regulation Act 1973Foreign Exchange Regulation Act 1973

ObjectivesTo regulate certain payments

To regulate dealings in foreign exchange andsecurities.

To regulate holding of immovable property of thecountry.

To regulate employment of foreign nationals.

to regulate foreign companies.


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Foreign Exchange Regulation Act 1973Foreign Exchange Regulation Act 1973

Provisions Regulation of dealings in foreign exchange

Restrictions on payments

restrictions on establishment of place ofbusiness in India.

restrictions on Immovable property

restrictions on import and export ofcurrency.


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Foreign Exchange Management Act 1999Foreign Exchange Management Act 1999

There was a lot of demand for a substantialmodification of FERA in the light of ongoingeconomic liberalization and improving foreignexchange position.

Accordingly, a new act the FEMA, 1999 replacedthe FERA.

ObjectivesTo facilitate external trade and payments.

To promote orderly development andmaintenance of foreign exchange.


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ProvisionsProvisions

1. Dealing in Foreign Exchange (Section 3) No person shall

deal in any foreign exchange or foreign securitywith any person other than authorized person.

Make any payment to or for credit of any personresident outside India.

Enter into any financial transaction in India as aconsideration for or in association with acquisition

or creation or transfer of a right to acquire anyasset outside India by any person.


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2. Holding of Foreign Exchange (Section 4) No person, resident in India, shall acquire, hold,own possess or transfer any foreign exchangeforeign security or any immovable propertysituated outside India, without permission from

the RBI3. Current Account Transaction FEMA permits dealings in foreign exchange

through authorized persons for current account

transactions.4. Capital Account Transaction Any person may sell or draw foreign exchange to

or from an authorized persons for capital account

transactions permitted by the RBI in consultation


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5. Export of Goods and Services Every exporter of goods or services shall furnish

to the RBI details regarding the export value ofsuch goods

6. Realization of Foreign Exchange Where any amount of foreign exchange is due

accrued to any person resident in India, such aperson shall take steps to realize such foreignexchange with in specified period of time.


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7. Contravention and Penalties Penalty for any kind of contravention under this

act is liable to a penalty up to thrice the amountinvolved where it is quantifiable or up to 2 lakhs

where it is not quantifiable and where suchcontravention is continuing one, for the penaltywhich may extend to five thousand rupees forevery day after the first day during which the

contravention continues.


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Tax Legislations


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Central Sales TaxCentral Sales Tax

The central sales tax is an indirect tax where thetax is levied in sales which are effected in thecourse of inter- state trade or commerce.

The act was passed in the year 1956 by the

parliament in exercise of the authority conferredon it under the articles 286 and 269 of theconstitution of India.


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Constitutional ProvisionsConstitutional Provisions

Following are the provisions were made by theamended article 286

No law of a state shall impose or authorize theimposition of a tax on the sale or purchase of

goods if such sale or purchase takes placeoutside the state.

No law of a state shall impose or authorize theimposition of a tax on such sale or purchase of

goods which takes place in the course of importof the goods into or export of the goods out of theterritory of India.


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Constitutional ProvisionsConstitutional Provisions

Any law of a state imposing or authorizing toimpose a tax on the sale or purchase of goods inthe course of inter-state trade or commerce shallbe subject to such restrictions, as may bespecified by the parliament through legislation.

The parliament may enact proper legislation fordetermining the place of sale or purchase ofgoods.


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Scope of the Act ( CST Act 1956)Scope of the Act ( CST Act 1956)

It extends to the while of India.

it is divided into 6 chapters and 26 sections

It makes provision for single point as well multiple point tax.

Under this act, the goods have been classified as Declared goods

other goods

every dealer engaged in inter-state trade has toget himself registered with this act.

The tax is levied under this act by the centralgovt. but it is collected by state govt.


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Scope of the Act ( CST Act 1956)Scope of the Act ( CST Act 1956)

The act does not provide rules regardingsubmission of returns, payment of tax, appealsetc.

The central govt. and the state govt. are

empowered to frame proper rules and regulationsfor the implementation of various provisions ofthis act.


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Principles for Determining the Nature of SalePrinciples for Determining the Nature of Sale

1. Sale or purchase in the course of inter statetrade or commerce ( section 3) A sale or purchase of goods shall be deemed to

take place in the course of inter-state trade

commerce if the sale or purchase. Occasions the movement of goods from one

state to another.

is effected by a transfer of documents of title

to the goods during their movement from onestate to another.


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2. Sale or Purchase of goods inside a State A sale or purchase of goods shall be deemed to

take place inside a state if the goods arespecific or ascertained at the time of thecontract of sale and are with in the state.

3. Sale or purchase of goods in the course ofexport

A sale or purchase of goods shall be deemed totake place in the course of the export of the

goods out of the territory of India if the sale or purchase occasions such export It it effected by the transfer of documents of

title to the goods after the goods have crossed

customs frontiers of India


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4. Sale for Purchase of goods in the courseof Import The sale or purchase either occasions such

import

The sale or purchase is effected by atransfer of documents of title to the goodsbefore the goods have crossed the custom

frontiers of India


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Exception from CSTException from CST

Exemption on subsequent sale Subsequent sale to govt. Subsequent sale to registered dealer.

Goods for mining Extraction of ore from the mine.

Washing, screening and dressing the ore

Transport of the ore from the riverside to the

harbor by means of barges. Blending of ore.


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Good for generation or distribution of electricityBattery cells to be used by linesmen to work on

lines during night.

Raincoats for the use of linesmen.

Soaps, paints, varnishes for the purpose ofcleaning boilers and electrical goods.

Goods for generation or distribution of electricity

Transfer of the goods otherwise than sale


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The unit of the buyer is located in any specialeconomic zone.

The dealer purchases the goods for the purpose ofmanufacture, production, processing, assembling,

repairing, reconditioning, re-engineering, packaging.


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DeductionsDeductions

Turnover of goods sold outside the state.

Turnover of goods sold in the export.

Value of goods transferred to other places ofbusiness.

Turnover of goods unconditionally exemptunder a state sales tax act


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Central Excise DutyCentral Excise Duty

The Supreme Court has defined-

Excise duty is a levied necessarily on thosedutiable goods which are produced ormanufactured in India and it has no

relationship with the sale of these goods. Excise duty is a duty on the production ormanufacture of goods with in India. The dutyof excise is levied on manufacturer orproducer in respect of the commoditiesproduced or manufactured by him.


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Laws Relating to Excise DutyLaws Relating to Excise Duty

Central Excise Act 1944(CEA)

Central Excise Rules 1944 (CER)

Central Excise Tariff Act 1985 (CETA)

Central Excise (valuation ) Rules, 2000


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Scope of Central Excise DutyScope of Central Excise Duty

Excise duty is levied on goods.

Excise duty is levied on the production ormanufacture of goods.

The burden of this tax falls on the consumers

Excise duty is levied on the dutiable valuecalculated by a general or special method.

Excise duty is payable when the goods are

removed from the place of removal. Excise duty is levied through out India in thesame form.


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Scope of Central Excise DutyScope of Central Excise Duty

Excise duty is imposed on manufactured goodonly once except when these goods becomethe raw material for some other goods.

Excise duty lay requires special records to be

kept for removing the goods from the place ofproduction, stock, or place of removal.


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Basis of Levy Of Excise DutyBasis of Levy Of Excise Duty

1. Specific Duty It is the duty payable on the basis of certain fixedunit like weight, length, volume, etc.

2. Tariff Value

T.V. is a notional value fixed by the govt. underthe section3(2) of CEA for the purpose ofcalculating the duty payable.

Govt. can fix different tariff values for different

classes of same excisable goods or Manufacturedby different producers or sold to different classesof buyers.


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3. Duty based on MRP Section 4A of the CEA empowers the govt. tospecify goods on which duty will be payablebased on MRP printed on carton.

The goods should be covered under provisions ofstandards of weights and measures Act 1976.

A reasonable deduction is allowed from suchretail price to provide for excise duty.


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4. Duty based on production capacity Section 3A of the CEA Act gives power to the

govt. to notify certain goods where themanufacturer will have to pay duty on the basisof production capacity.

Commission of Central Excise will determineannual capacity of production of the factory.

5. Ad Valorem duty Duty on goods are payable on the basis of value

of goods. The assessable value (AV) is arrived at on the

basis of section 4 of CEA and duty is payable onthe basis of percentage of such value at the rates

specified in CETA 1985


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6. Levy of Slabs Under this system the excise duty is levied on thebasis of different slabs based on variousparameters like turnover, production capacity etc.

SSI units are taxed on the basis of turnover6. Compound levy Scheme Meant for the small scale decentralized sector

e.g. embroidery, marble, stainless steel etc.

Duty for a specified period is fixed on the basis ofthe number and type of machines.

Manufacturer has to observe day today excise

formalities regarding maintenance of account


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Exemptions from Central Excise DutyExemptions from Central Excise Duty

Section 5A of the CEA 1944 empowers the centralgovt. to issue notifications exempting goods fromthe payment of central excise duties. They are

small scale industry Exemption

Job work ExemptionCaptive Consumption

Goods produced without the use of power.

Cottage and village industry products

Goods produced at exhibitions and trade fairs.

Goods produced by educational, technical andresearch institutions.

f C


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Exemptions from Central Excise DutyExemptions from Central Excise Duty

Goods produced in govt. factories, mines, prisonsand defense production.

Solar and Natural energy.

Goods produced by free trade zones and 100%

export oriented units.Capital goods meant for use in export goods.

Ki d f E i D t


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Kinds of Excise DutyKinds of Excise Duty

1. Basic Excise DutyThis is called as CENVATThis duty id levied on the goods included in the

first schedule of the CETA.

2. Special Excise Duty Goods included in the II schedule of the CETA are

subjected to SED.

The general rate of this duty is 8%

It includes items like motor cars, polyesterfilament yarn, tyres, soft drinks etc.

fKi d f E i D t


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3. National calamity Contingent Duty NCCD has been imposed by the Finance Act 2001

This duty shall be in addition to the any otherduties of excise chargeable on goods.

This duty is imposed on Pan masala @23%,Cigarettes @ Rs 20 to 235 per thousand, bidis Rs.1 to Rs.2 per thousand and tobacco products @105

Finance Act 2003 included other goods likepolyester filament yarn, motor cars, multi utilityvehicles and two wheelers @1% and domesticcrude oil @ Rs 50 per metric tonne.

Ki d f E i D tKi d f E i D t


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4.Special Additional DutyThis duty shall be in addition to any other duties

of excise chargeable on such goods under thesection CEA 1944 or any other law for the time

being in force. Motor spirit Rs & 7 per liter, high speed diesel oil

re. 1 per liter.

5. Educational CessThe Finance Act 2004 imposed an education cess

on dutiable goods manufactured in India @ 2% onthe aggregate duties of excise chargeable onsuch goods.

CENVATCENVAT


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CENVATCENVAT

The Finance Act 200 had introduced the newCENVAT scheme replacing the MODVAT schemefrom 1/4/2000.

It is tax on value addition.

CENVAT is basically an input duty relief schemeunder central excise designed to reimburse theuser manufacturer with the duty paid on the inputwhich ha has absorbed as part of purchase price

when buying the same for producing finishedproducts.

Hi hli htHi hli ht


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HighlightsHighlights

The CENVAT scheme is principally based onsystem of granting credit of duty paid on inputs.

under CENVAT, a manufacturer has to pay dutyas per normal procedure on the basis ofAssessable value.

He gets credit of duty paid on inputs.

The CENVAT credit system is available on capitalgoods used in the manufacture of final goods.

The term capital goods does not includes officeequipments.

SS


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ScopeScope

The CENVAT covers all inputs except High SpeedDiesel oil and Motor Spirit

CENVAT credit also coves inputs used in themanufacture of capital goods.

C diti f A ili th C ditC diti f A ili th C dit


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Conditions for Availing the CreditConditions for Availing the Credit

CENVAT scheme is applicable to all finishedexcisable goods.

The conversion of inputs into final productsshould involve the element of manufacture.

Credit is allowed for specified duties paid oninputs or capital goods.

The use of inputs must be in or in relation to themanufacture.

I TIncome Ta


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Income TaxIncome Tax

Income tax is very important direct tax.

Every person, whose taxable income for theprevious financial year exceeds the minimumtaxable limit is liable to pay the central govt.income tax during the current financial year onthe income of the previous year, at the ratesface during the current financial year.

In India, income tax was introduced for the first

time in 1806, by Sir. James wilson, in order tomeet the losses sustained by the govt.

1886 Income tax Act was passed.

Final income tax Act was passed in the year 1961.

B i f Ch f I tBasis for Charge of Income tax


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Basis for Charge of Income taxBasis for Charge of Income tax

Income tax is an annual tax on income.

Income of previous year is taxable in the nextfollowing assessment year at the rate or ratesapplicable to that assessment year.

Tax rates are fixed by the annual Finance Act.Tax is charged on every person as defined in

section 2 (31).

The tax is charged on the total income of every

person computed in accordance with ACT.

Basis for Charge of Income taBasis for Charge of Income tax


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Basis for Charge of Income taxBasis for Charge of Income tax

The income tax is computed on the basis of theresidential status of the assessee in the mannerprovided hereunder and is classified in to thefollowing heads.

Income from salaries.

Income from House Property.

Profits of business or profession.

Capital gains

Income from other sources

Rates of Tax for an IndividualRates of Tax for an Individual


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Women

On Rs. 1,35, 000 Nil

Next on Rs 15000 10%

Next on Rs 1.00,000 20%

Next balance 30%



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Senior Citizen

On Rs. 1,85, 000 Nil


Next balance 30%



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Other Individuals

On Rs. 1,00, 000 Nil


Next on Rs 1.00,000 20%

Next balance 30%



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Surcharge If total income exceeds Rs. 10,00,000 @10%

education cess.

On the amount of income tax surcharge Rs. 2%


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Problems in Administration ofIncome Tax in India

1 Large Non Monetized Sector1 Large Non Monetized Sector


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1. Large Non-Monetized Sector1. Large Non-Monetized Sector

There is a large non-monetized sector in the

developing country like India.

It is very difficult to assess the income originatingin this sector.

Even highly skilled tax administrator have foundit difficult to evaluate the real income of farmersand other self-employed people, and includingthe value of home produced and consumed food

in the taxable income of the farmer.

2 Less Literacy Rate2 Less Literacy Rate


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2. Less Literacy Rate2. Less Literacy Rate

The majority of the population in the India is

illiterate.

Most of the farmers, wage earners, small shopkeepers, craftsmen, etc. cannot fill out even thesimplest income tax return forms.

2 non-voluntary compliance2 non-voluntary compliance


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2. non-voluntary compliance2. non-voluntary compliance

Key to successful income tax is voluntary

compliance on the part of tax payers.

This condition is less in India.

Large number of businessmen do not maintain

books properly. While fixed income groups pay income tax

regularly and a large number of prosperousbusinessmen pay only a very small part of their

income.

4 Anonymity in the Ownership of Wealth4 Anonymity in the Ownership of Wealth


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4. Anonymity in the Ownership of Wealth4. Anonymity in the Ownership of Wealth

Anonymity in the ownership of wealth is another

serious problem.

This is in the form of bearer shares in the caseof companies or the system of benami in India.

This makes it difficult to assess the income fromcapital or wealth in an effective way.

5 No Single Comprehensive Tax5 No Single Comprehensive Tax


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5. No Single Comprehensive Tax5. No Single Comprehensive Tax

In India there is no single comprehensive tax

system. It follows cedular system of income taxation.

This system has imposes separate taxes on

different sources of income. It leaves many important sources entirely

untaxed.

6 Inefficient and Corrupt Administration6 Inefficient and Corrupt Administration


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6. Inefficient and Corrupt Administration6. Inefficient and Corrupt Administration

As far as the tax enforcement aspect is

concerned, perhaps the most serious criticism isthe inefficient and corrupt administration indeveloping countries.

As a result, taxes are not strictly enforcedresulting in a loss of revenue to the govt.

7 Inflexible7 Inflexible


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7. Inflexible7. Inflexible

Another defect that characterizes the Indian tax

system is its inflexibility. It depends mostly on urban incomes and leaves

out almost completely agriculture incomes fromthe purview of direct taxes.

8 Inter sectoral Imbalances in the Tax structure8 Inter sectoral Imbalances in the Tax structure


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8. Inter sectoral Imbalances in the Tax structure8. Inter sectoral Imbalances in the Tax structure

There are inter-sectoral imbalances in India's tax

structure as agricultural incomes are virtually taxfree.

After the land reforms were carried out and newtechnology was introduced in agriculture, a newclass of large farmers emerged in India.

Income of these farmers are now fairly high andyet they are tax free.

These developments during the past fourdecades have created inter-sectoral imbalancesin the tax structure.

9 Large Evasion9. Large Evasion


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9. Large Evasion9. Large Evasion

On top of inflexibility of the tax system, is its

faulty structure, resulting in large scale evasion oftax.

Following causes are responsible for largeevasion of taxes.

corrupt business practices

Ineffective tax enforcement.

undue curbs on business expenses on

entertainment, advertisement, travel etc.

The Foreign Trade ( Development and regulation)The Foreign Trade ( Development and regulation)

A 1992


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Act 1992Act 1992

This act which replaced the Imports and exports

(Control) Act 1947, came into force on 19th June1992.

Objective

To provide for the development and regulation offoreign trade by facilitating imports into andaugmenting exports from India.



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1. Development and RegulationThe Act empowers the central govt. to make

provision for the development and regulation offoreign trade by facilitating imports andincreasing exports.

2. Prohibition and RestrictionThe Act empowers the central govt. to make

provision for prohibiting, restricting or otherwise

regulating the import or export of goods as andwhen required.

3. Exim PolicyThe act lays down that the central govt. may,

from time to time, formulate and announce the



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4. Director general of Foreign TradeThe Act provides for the appointment by the

central govt. , of a Director General of ForeignTrade for the purpose of this Act.

The DGFT shall advice central govt. in theformulation EXIM policy and shall responsible forcarrying out that policy.

5. Importer- Exporter Code Number

The Act lays down that no person shall make anyimport or export except under an Importer Exporter Code (IEC) numbers granted by DGFT orthe officer authorized by him in his behalf.



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6. Issue and Cancellation of LicenseThe DGFT or any other officer authorized under

this Act is empowered to suspend or cancel alicense issued for export or import of goods inaccordance with this act for good and sufficientreasons.

7. Search, Inspection and Seizure Where any contravention of any condition of

license of authority under which any goods areimported is suspected or made, any personauthorized by the central govt. may search,inspect and seize such goods, documents, things

and conveyances subject to such requirements



89/89


8. Penalty for Contravention Where any person makes or attempts to make

any export or import in contravention of anyprovisions of this Act or any rules or orders madeunder this Act or the EXIM policy, he shall beliable to a penalty not exceeding one thousandrupees or five times the value of the goodsinvolved, which ever is more

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