Tax and Economic Reforms of UP - 1 | Course for UPPSC Preparation - UPPSC (UP) PDF Download

Introduction

• Tax Revenue
• Non-Tax Revenue

Tax

• Meaning –
  Tax is a mandatory payment made by citizens to fund public spending. It’s legally enforced, and refusal to pay is not permitted.
• Definition –
  Tax is a mandatory financial contribution required from citizens to support government expenditures. It is legally obligatory, and non-compliance is not allowed.
• Characteristics of Tax –

• Obligatory payment to the government, enforceable by law.
• No direct benefits guaranteed in exchange for paying taxes.
• Involves a sacrifice on the part of the taxpayer.
• Taxes are not imposed as fines or penalties for legal violations.

Some of the tax revenue sources are :-

• Income tax
• Corporate tax
• Sales tax
• Surcharge
• Cess

Types of Tax :

• Direct Tax
• Indirect Tax

Direct Tax :
A direct tax is imposed directly on an individual's income and wealth, paid directly to the government. The tax burden cannot be shifted to others, and it is progressive, collecting more from the wealthy and less from the poor. Income Tax is an example.

Indirect Tax :
Indirect Tax is applied to those who purchase goods and services, paid indirectly to the government. The tax burden can be shifted to another party. It is levied uniformly on all individuals, regardless of wealth, and includes taxes such as excise duty, sales tax, custom duty, entertainment tax, and service tax.

Tax Reforms in Uttar Pradesh

• Introduction of GST (2017): Uttar Pradesh implemented the Goods and Services Tax (GST) in 2017, replacing numerous intricate taxes with a unified system. This measure aimed to reduce compliance costs and simplify business operations.
• Stamp Duty Reduction (2018): In 2018, the state decreased the stamp duty on property registration from 7% to 6%, enhancing accessibility and affordability in property acquisition.
• Streamlined Tax Structure: Efforts were made to minimize the number of taxes and levies on businesses, ultimately reducing the overall cost of conducting business in the state.
• Online Tax Filing and Payment: The introduction of online tax filing and payment systems facilitated a more straightforward and cost-effective approach to tax compliance.

GST ( Good & Service Tax ) 

• Overview: GST, implemented in India in 2017, replaced multiple indirect taxes. The comprehensive, multi-stage, destination-based tax is levied on the value addition at every stage of the supply chain.

• Destination-Based Taxation: GST is levied at the point of consumption, ensuring that tax revenue from goods sold in a particular state goes to that state. This destination-based approach prevents tax revenue from being collected by the manufacturing state.
• Components of GST: GST consists of three components—Central GST (CGST), State GST (SGST), and Integrated GST (IGST)—each applicable to different types of transactions, whether intra-state or inter-state.

Advantage of GST :

• Elimination of Cascading Effect: GST removes the cascading effect on the sale of goods and services, as tax on tax is eliminated. This directly leads to a decrease in the cost of goods.
• Technological Driven: GST processes, including registration, return filing, refund applications, and responses to notices, are conducted online on the GST Portal. This technological approach speeds up administrative processes.

Description of some taxes in Uttar Pradesh

• Sales Tax serves as the primary revenue source for the state government in Uttar Pradesh. Additionally, State Excise Duty and Stamp and Registration Fees contribute to the state's income. The Sales Tax Act was enacted in 1939, with a subsequent revision in 1948 under the Uttar Pradesh Sales Tax Act. This was later renamed the U.P. Trade Tax Act in 1994. The Uttar Pradesh Entry Tax Act was introduced in 1999. From January 1, 2008, the Value Added Tax (VAT) system replaced the Sales Tax with 15 specified rates, and from July 1, 2017, the Goods and Services Tax (GST) was implemented.
• Despite the introduction of the GST, certain items like petrol, diesel, alcohol, and natural gas still fall under the previous VAT taxation system.

Stamp and Registration Fees

• Following trade tax and excise duty, stamp and registration fees constitute a significant portion of the state's tax revenue. The Stamp and Registration Department plays a crucial role in directly providing services to the public, handling the registration of various documents related to transactions.

Excise Duty

• The Excise Department in Uttar Pradesh prioritizes the development, regulation, and effective control of the prohibition of intoxicating substances. Revenue is primarily generated through excise duty on items like alcohol, bhang, marijuana, and beer. The department dedicates 99 percent of its income to state development projects.
• The liquor business monopoly system was replaced in 2001-02, allocating licenses to small businesses through a lottery system. Uttar Pradesh is a major contributor to sugar production, and sugar syrup is used in various industries besides alcohol manufacturing.

Ethanol Blending Initiative in Uttar Pradesh :

• Pilot Project Inception : The Indian government launched a pilot project in Uttar Pradesh and Maharashtra in 2001-02.
• Gasohol Production : The project aimed to produce gasohol from power alcohol.
• Initiation of Ethanol Blending : Starting in 2008, the scheme involved blending 5% power alcohol (ethanol) with petrol at most of the state’s oil terminals and depots.
• Increased Ethanol Blend : However, since January 2013, the blending rate was increased to 10% ethanol with petrol.
• Uttar Pradesh’s Contribution :  Uttar Pradesh plays a significant role, contributing approximately 40% to the country’s total ethanol production.

Prohibition Around Pilgrimage Sites in the State :

• Scope of Prohibition : A comprehensive alcohol ban is in effect within a one-kilometre radius of 19 pilgrimage sites in the state.
• Included Sites : These sites include notable places like Vrindavan, Ayodhya, Naimisharanya, Peeraan Kaliyar, Deva Sharif, Devband, Jain pilgrimage sites, Krishna Janmasthan, Triveni Sangam, Kashi Vishwanath, and more.
• Special Consideration : Meat prohibition is also enforced at Jain pilgrimage sites.

Shop Closures on Special Occasions :

• Independence Day : August 15
• Republic Day :  January 26
• Dr. Ambedkar’s Birthday : April 14
• Mahatma Gandhi’s Birthday :  October 2
• Additional Days : Three more days as determined by the District Magistrate’s discretion

Alcohol Sales Prohibition in Specific Areas :

• Gandhi Villages : Prohibition on alcohol sales near Gandhi villages.
• Dalit and Slum Areas : Prohibition on alcohol sales in these areas.
• Ambedkar Villages : Alcohol sales are restricted in the vicinity of Ambedkar villages.

Uttar Pradesh is a state abundant in molasses and alcohol. Therefore, the department’s endeavour is to establish as many alcohol and molasses-based industries in the state as possible.