Issue 5 - Volume 1 | January 2018

2017 State Business Tax Climate Report

By: Chintan Patel

Taxes are levied by governments on their citizens to generate income for undertaking projects to boost the economy of the country and to raise the standard of living of its citizens. While direct and indirect taxes are the two main types of taxes, there are also other small cess taxes like professional tax, municipal tax etc. These taxes help the government fund several initiatives that concentrate on the improving the basic infrastructure and maintain general well being of the country.

Important taxes that one should be aware are listed below for your reference:

1. Income Tax

This is most important type of direct tax and almost everyone is familiar with it. TDS is important for the businesses to understand. For the specified assesses making payments above threshold limit in certain categories are required to deduct tax and pay to government.

2. Goods and Service Tax

GST, a biggest tax reform effective from 1st July 2017,  is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

3. Wealth Tax

This is in addition to the income tax and is levied if your net wealth exceeds Rs 30 Lakh at the rate of 1% on the amount exceeding Rs 30 Lakh

4. Property Tax/Capital Gains Tax

This is levied on the capital gains arrived by selling property and stocks. Tax rates are different for long term and short term capital gains.

5. Professional Tax

If you are earning professional you need to pay professional tax. Professional tax is imposed by respective Municipal Corporations. Most of the States in India charge this tax.
This tax is paid by every employee working in Private organizations. The tax is deducted by the Employer every month and remitted to the Municipal Corporation and it is mandatory like income tax.

6. Municipal Tax:-

Municipal Corporation in every city imposed tax in terms of property tax. Owner of every property has to pay this tax. This tax rate varies in every city.

7. Stamp Duty, Registration Fees, Transfer Tax

If you decide to purchase property than in addition to cost paid to seller. You must consider additional cost to transfer that property on your name. That cost include registration fees, stamp duty and transfer tax. This is required for preparing legal document of property.

You need to ensure compliance of tax payment and Return filing as per various laws & regulations to save from penalties or notices. Each type of tax has its own penalties associated with it. These penalties can range from fines to imprisonment depending on the severity of the crime. In some cases the penalty could be that you will have to pay what is owed in taxes along with additional sums as fine, which are decided upon by government officials.
It is always advisable to pay taxes on time and always be aware of the taxes that you, as a consumer, are liable to pay so that no-one can take you for a ride.

Our firm publishes the Compliance Handbook every year that includes easy to understand all important taxes and filing/payment requirements in table form. It may be referred at

Improvement of India Ranking in Ease of doing business Index:
India's ranking in the World Bank's ease of doing business index showed a significant improvement driven by reforms in access to credit, power supplies and protection of minority investors. As per the latest report released, India has moved to 100th spot from 130th position.

The government has taken various initiative over last few years for tax reforms. With the Goods and Service Tax being introduced recently, now the focus would be on ensuring compliance and smooth tax administration. It is expected that more measures of simplification of income tax, GST and other returns on one hand and the penal actions for evaders will be taken by the government in coming years. Therefore my advise to all SMBs is “Pay Taxes and ensure regular Compliance for Long term business Stability.



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