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The history and evolution of Indirect taxes in India is a timeline into the economic and social development of this nation. From the earliest records of taxation during the Maurya Dynasty to the modern unified Goods and Services Tax (GST) regime, the various Indirect taxes imposed by central and state governments are indicative of the changes this nation has undergone in the last few centuries. In this article, we explore the history and development of Indirect Taxes in India, how it has evolved over the years and how it stands today.

Indirect taxes, such as customs duties and excise duties, have been part of Indian history for centuries. Transparent taxation systems have allowed India to successfully bring some of its products to a global market, encouraging commerce and development.

The earliest known records of taxes in India date back to 600 B.C., when the Maurya Dynasty imposed taxes on animals to fund the protection of India’s rural communities. In the 16th Century, Emperor Akbar shifted the tax burden from royal edicts to a centralized taxation system. This system set the foundation for what would become the modern Union excise duty imposed by the British.

In the 19th century, the East India Company expanded the tax system to cover imports and exports and applied the rules uniformly across all parts of the country. The Industrialization Department of the Government of India was established in 1909 and took over the taxation responsibilities from The East India Company. This allowed India to develop a modernized taxation system which included Corporation Tax and Income Tax.

The Indian Income Tax Act of 1922 was India’s first comprehensive taxation system that extended taxes to individuals and corporations. This was followed by the introduction of the estate duty, or ‘Income Tax on the transfers of property’. It was followed in 1959 by a value-added tax, with an aim to help the direct taxation segment of the Government of India’s revenue.

However, the present-day tax system finds its roots in the Indirect Taxes Enactment of 1986. It made sweeping changes to the existing regime and divided excise duties and customs duties into different groups. This classification was further reiterated by the Introduction of The Goods and Services Taxes (GST) regime in 2017.

The Goods and Services Tax (GST) replaced all the indirect tax levies imposed by the Central and State governments. It was revolutionary inasmuch as it showed the Government’s intentions of making India a unified market and bringing into effect an unified regime of taxation, thereby making doing business easier in India.

Today, the indirect taxes enacted by the Indian Government are constantly being tweaked and improved to keep up with the changing economic and business environment and to ensure that the Government is able to generate sufficient resources to fund its operations.

In conclusion, the evolution of Indirect taxes in India is evidence of the changing trends in the economic and social structures of the country. From the Maurya Dynasty right through to the present-day GST regime, the Indian taxation system has come a long way in ensuring a fair, equitable and efficient taxation structure while generating revenue to support the nation’s needs. It is a testament to the Government’s efforts to employ modern technology and taxation techniques to bring the nation closer to becoming a truly unified market.

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April 2024