Saturday, September 15, 2012

History of IRS (Excise,Customs & Service Tax)

Excise is an English word borrowed from Middle Dutch "excijs",and it means to take out a part from something e.g. to excise or scoop out a part of apple with a knife. The excise tax was so called because it was introduced in England/Great Britain/U.K. long back during the time of the Kings and meant taking a part out of.It was introduced in India by the British as separate laws for different commodities manufactured or produced for e.g. motor spirit,cigarettelighters,cotton cloth and later salt, and thus established a whole system for its collection. Finally all theseacts were consolidated as one act i.e. The Central Excise & Salt Act ,1944 and received the assent of the then Viceroy of India on the 24th of February,1944.The purpose was to collect the indirect tax i.e. central excise from manufacturers/producers of goods in India.

Prior to Excise, the first recorded history of poppy cultivation in India in the 15th Century refers Cambay and Malwa as the places where it was grown. During the Mughal Empire, poppy was extensively grown and it was an important article of trade with China and other Eastern countries. During the latter part of the 16th Century, opium was brought under a State monopoly. However, during the twilight years of the Mughal Empire, the State lost its hold and control over the production and sale of opium was appropriated by a ring of merchants in Patna. In 1757, the monopoly of the cultivation of poppy passed into the hands of the East India Company who had by that time assumed the responsibility for collection of revenue in Bengal and Bihar. In 1873, the then Governor General, Lord Warren Hastings brought the entire opium trade under the control of the Government.The administration of the Narcotics Laws, namely, the Opium Act of 1857 & 1878 and the Dangerous Drugs Act 1930 were vested with the Provincial Government. The amalgamation of these Agencies laid the foundation of the Opium Department in November, 1950 which is presently known as Central Bureau of Narcotics (CBN). The headquarters of Central Bureau of Narcotics was shifted from Shimla to Gwalior in 1960. All the three enactments mentioned above were repealed by the Narcotics Drugs & Psychotropic Substances Act, 1985 (NDPS Act, 1985).

The money collected through these measures was used to run the administration including central,state and district administration, to bring about infrastructural development and various other amenities,facilities and necessities for development of the country and the people of India.

The British also started levying import/export duties at the time of import or export of goods to/from India at the sea ports as a custom duty for the very same purpose and also to meet the cost of various wars what they were continuously waging.The officers in charge were responsible for collecting and safeguarding customs duties and for controlling the flow of goods including animals, transports, personal effects and hazardous items in and out of a country. Therefore, they introduced the Sea Customs Act,1878 which later became the Indian Customs Act,1962.

The Central Board of Revenue was the apex body charged with the administration of taxes came into existence as a result of the Central Board of Revenue Act, 1924. Initially this Board was in charge of both direct and indirect taxes. However, when the administration of taxes becomes too unwieldy for one Board to handle, the Board was split up into two, namely the Central Board of Direct Taxes and Central Board of Excise and Customs with effect from 1.1.1964. This bifurcation was brought about by constitution of the two Boards u/s 3 of the Central Boards of Revenue Act, 1963. Since then Central Board of Excise and Customs is the national agency responsible for administering customs and excise in India.

Till 1969, there was physical control system wherein each clearance from the factory was done under the supervision of the Central Excise Officers. Introduction of Self-Removal procedure was a watershed in the excise procedures.In 1994, the gate pass system gave way to the invoice-based system, and all clearances are now affected on manufacturer's own invoice. Another major change was brought about in 1996, when the Self-Assessment system was introduced.

Service tax was imposed for the first time in India in July 1994. The service tax is applicable all over India however due to the national interest and for the betterment of the people of Jammu and Kashmir it is waved off. Service tax is also a form of indirect tax that is applicable to the services that are taxable in nature.In past few years more than 100 services have been brought under its net.

Thus, the collection from all these taxes has contributed the Government's kitty throughout the ages which has funded India's growth and development in all spheres,as the government needs a good and stable financial resource to manage a whole nation. Without it, the services offered to all citizens could not be effectively managed. The government uses this revenue to support public healthcare, social security, national defence, free elementary education, public housing, and many other social services.
Now we are moving ahead towards Goods and Services Tax (GST) which is one of the proposed tax reforms that center round evolving an efficient and harmonized consumption tax system in the country. Presently, there are parallel systems of indirect taxation at the central and state levels In the Union Budget for the year 2006-2007, Finance Minister proposed that India should move towards national level Goods and Services Tax that should be shared between the Centre and the States. He proposed to set April 1, 2010 as the date for introducing GST. World over, goods and services attract the same rate of tax. That is the foundation of a GST. The first step towards introducing GST is to progressively converge the service tax rate and the CENVAT rate.

The goods and service tax (GST) is proposed to be a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at a national level. Integration of goods and services taxation would give India a world class tax system and improve tax collections. It would end the long standing distortions of differential treatments of manufacturing and service sector. The introduction of goods and services tax will lead to the abolition of taxes such as octroi, Central sales tax, State level sales tax, entry tax, stamp duty, telecom license fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services, and eliminate the cascading effects of multiple layers of taxation. GST will facilitate seamless credit across the entire supply chain and across all states under a common tax base.

National Academy of Customs Excise & Narcotics (NACEN) is the premier training institute of Government of India. It is under the administrative control of the Central Board of Excise & Customs (CBEC), Department of Revenue, Ministry of Finance, Government of India.

NACEN is headed by a Director General, who is assisted by Additional Director Generals, Additional Directors, Deputy Directors and Assistant Directors. Director General, NACEN is a very senior civil servant of India, belonging to the India Revenue Service who is of the rank of Additional Secretary to Government of India.

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