Question

Which of the following Tax is levied by Union and collected and appropriated by States ?
1. Stamp duties
2. Passenger & Goods Tax
3. Estate Duty
4. Taxes on Newspapers
5. None of the above/More than one of the above

Answer 1

Correct Answer - Option 1 : Stamp duties

The correct answer is Stamp duties.

• Stamp duties are levied by Union and collected and appropriated by States.
• Tax system between the States and the Union of India:
  • Generally, in a typical federation along with the distribution of legislative and administrative powers.
  • The financial resources of the country are also so distributed to ensure the financial independence of the units.
  • However, the Indian Constitution does not make a clear cut distribution of the financial resources and leaves much to be decided by the Central Government from time to time.
  • The financial resources which have been placed at the disposal of the state are so meagre that they have to look up to the Union Government for subsidies and contributions.

• Passenger & Goods Tax:
  • Passenger tax is in principle a tax on passenger fares paid for commercial transport services.
  • Typically, the tax is a percentage levied on bus fares and is collected from commercial road transport operators.
  • Employing the user charge argument, it is possible to make the argument that buses cause a considerably greater amount of damage to roads as compared to other passenger vehicles.
  • It is a special tax on buses will lead to increased efficiency in resource allocation in that the price will better reflect costs of the service and thus would adequately finance the costs of investment on roads and related infrastructure and their maintenance.
• Estate Duty:
  • Estate duty is a tax on such Estate being passed on or beneficiary receiving the Estate, depending on how the law is framed.
  • Normally, the liability of Estate duty is restricted to the value of the Estate.
  • Inheritance tax works on a similar principle as Estate Duty and accordingly both the terms are often used interchangeably.
  • India had introduced the Estate Duty Act, 1953 (EDA) to levy duty ranging between 5% to 40% on the estate passed upon the death of a person, subject to certain thresholds and exemptions.
  • The EDA was later repealed in 1985 on the count that administration cost to recover Estate Duty outweighed the tax collections.
• Taxes on Newspapers:
  • The newspaper would have to pay 5 per cent GST on the revenue earned from space selling but can avail of input tax credit for the tax paid by the advertising agency on the commission received.
  • However, if the advertisement agency supplies any service other than the selling of space for advertisement, such as designing or drafting the advertisement, and such supply is not a part of any composite supply, the same would be liable to tax at the rate of 18 per cent.