Indirect Tax in India

What is Indirect Tax?

The tax imposed by the government on goods and services purchased by anyone in the country is called Indirect Tax. Indirect Tax can be defined as a type of tax in which the incidence and impact of the tax are passed on to another individual or entity i.e. the end consumer of the product....

Features of Indirect Tax

The features of Indirect Tax are as follows:...

Indirect Tax in India

In India, before July 2017, there were many different Indirect Taxes that were applicable on the sale and purchase of goods and services in the country. For Example, Service Tax was levied on any type of service, Excise Duty was levied on the manufacturing of goods, Customs Duty was levied on the import of goods, etc. On 29th March 2017, the GST Act was passed in the Parliament of India, which came into effect on 1st July 2017. This was done to merge all the indirect taxes into a single tax, i.e., Goods and Services Tax (GST) that can replace multiple layers of taxation in India. It has replaced 17 indirect taxes (9 State-level taxes and 8 Central level taxes) and 23 cesses of the States and Centres that existed earlier, including Central excise duty, Service tax, Value Added Tax (VAT), Luxury Tax, etc....

Types of Indirect Tax

Before GST there were many taxes prevailing in the market. Here is the list of major taxes that were merged into the Goods and Services Tax:...

Advantages of Indirect Tax

Collectibility: Compared to direct taxes, indirect taxes are simpler to collect. The government should not worry about the collection of indirect taxes because they are only collected at the time of making purchases. Convenience: Since indirect taxes are only paid when a purchase is made, they are easy on the taxpayer and handy. Furthermore, because indirect taxes are collected directly at the stores or factories, state authorities find it convenient to levy them. This helps to save a great deal of time and work. Fair contributions: Costs of goods and services and indirect taxes are closely related. This basically means that luxury things are taxed at higher rates while fundamental requirements are taxed at lower rates, ensuring that contributions are fair. Reduce Negative Consumption: Products like alcohol, cigarettes, and other comparable ones that are harmful to human health are subject to the greatest indirect taxation....

Disadvantages of Indirect Tax

Regressive: The nature of indirect tax can be regressive. For instance, the salt tax is the same for rich and poor people, but if a rich person doesn’t pay, there will be bigger fines as well. Financial Burden: There may be cumulative indirect taxes charged at times. As a result, middlemen in a point-based transaction system are likely to add their own service tax, which could raise the final price of the goods. Hindrance: Industry-unfriendly indirect taxes exist. Taxes on commodities and raw materials raise the cost of production, preventing industries from growing because their ability to compete is constrained....

Goods and Services Tax (GST)

The Goods and Services Tax or GST is a single, indirect tax that integrates all indirect taxes within the Indian economy. The GST Act was passed on 29th March 2017 in the Parliament of India and came into effect on 1st July 2017. The idea behind it was to replace multiple layers of taxation with one tax (GST). It has replaced 17 indirect taxes (9 State-level taxes and 8 Central level taxes) and 23 cesses of the States and Centres that existed earlier, including Central excise duty, Service tax, Value Added Tax (VAT), Luxury Tax, etc. The aim behind implementing the GST Act was ‘One Nation and One Tax’. When GST was implemented, 1300 goods and 500 services were taken into consideration....