Tax Reforms

What is the Sovereign Right to Taxation?


From UPSC perspective, the following things are important :

Prelims level: Taxation powers in India

Mains level: Retrospective taxation

Scrapping the retrospective levy is believed to provide clarity to investors by removing a major source of ambiguity on taxation laws, the government has stressed the need to establish its “sovereign right to taxation”.

Defining a Tax

  • A document on the Ministry of Statistics and Programme Implementation website quotes the definition of tax as a “pecuniary burden laid upon individuals or property owners to support the government; a payment exacted by legislative authority”.
  • It states that a tax “is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority”.

The ‘sovereign right to taxation’

  • In India, the Constitution gives the government the right to levy taxes on individuals and organizations but makes it clear that no one has the right to levy or charge taxes except by the authority of law.
  • Any tax being charged has to be backed by a law passed by the legislature or Parliament.

Taxation in India

  • Taxes in India come under a three-tier system based on the Central, State, and local governments and the Seventh Schedule of the Constitution puts separate heads of taxation under the Union and State list.
  • There is no separate head under the Concurrent list, meaning Union and the States have no concurrent power of taxation, as per the document.


Taxation in India: Classification, Types, Direct tax, Indirect tax

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