Indirect Tax

Introduction

• Indirect tax is a tax levied by the Government on goods and services and not on the income, profit or revenue of an individual.
• Indirect taxes have  incidence and influence at multiple places. As, for instance, sales tax, excise duty etc., are imposed on either the traders or the producers. However, it is the general consumers who bear the burden of the tax. 
• GST, Customs duty, service tax, and value added tax are some other examples. 

Characteristics of Indirect Taxes

• Indirect taxes are usually levied on a manufacturer or a supplier, who subsequently passes the tax on to the customer. 
• Taxes are levied on both commodities and services.
• Indirect tax does not take into account a customer’s ability to pay and is applied to everyone who purchases products or services.
• Because indirect taxes are levied automatically on products and services, they cannot be avoided.
•  It is proportional in nature. 
• It has the effect of raising the price of the products on which they are imposed. 

Indirect Taxes in India

• Goods and Services: Tax It is a single, multi-stage and destination based tax, levied at every stage such as from procuring the raw materials to selling the final product.
• Value Added Tax: It is a tax levied on each stage of value addition and the tax is finally paid by the consumer. It is also known as a consumption tax. VAT was merged in GST but in some products VAT is still applicable. 
• Excise Duty: It is levied by the Central Government of India for the production, sale, or license of certain goods. Excise duty charges are also collected by state governments for alcohol and narcotics. 
• Custom Duty: It is the tax imposed on exports and imports of goods. Duties levied on imports of goods are termed as import duty while duties levied on exported goods are termed as export duty.