1 / 5

What is Indirect Tax Difference between Direct Indirect Tax

Indirect taxes are those taxes that get shifted from one individual to another, whereas direct tax is imposed on the income profits of the individual business

takshilael
Download Presentation

What is Indirect Tax Difference between Direct Indirect Tax

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. What is Indirect Tax? Difference between Direct & Indirect Tax takshilalearning.com/what-is-indirect-tax-difference-between-direct-indirect-tax/ September 10, 2021 Indirect tax definition What is indirect tax? Indirect taxes are a kind of tax where the incidence and impact of taxation do not fall on the same entity. The government collects it from an intermediary like a retailer or a manufacturer. The customer pays the eventual tax amount of the products and services. Simply put, indirect taxes are those taxes that get shifted from one individual to another. Indirect taxes are not levied directly on the income of the taxpayer. The taxpayer pays it on the amount of the expenses incurred. Some samples of indirect taxes include nuisance tax, entertainment tax, excise duty, etc. Indirect Tax examples 1/5

  2. Types of indirect taxes in India There are seven main types of indirect taxes in India. GST (Goods and Services Tax) streamlined these taxes into one tax to scale back the hassles of compliance. The following are the kinds of Indirect Taxes on India – 1. Service Tax 2. Excise duty 3. Value Added Tax 4. Custom Duty 5. Stamp Duty 6. Entertainment Tax 7. Securities Transaction Tax 1. Service Tax : A service tax gets imposed on the services provided by an entity. The recipient of the services pays this tax. Service tax is collected by and deposited with the central government. 2. Excise duty: Excise duty tax gets levied on the products produced or manufactured in India. The manufacturer pays this tax on manufacturing. The manufacturer successively recovers the tax paid from its customers. 3. Value Added Tax: This tax gets levied on a product or service at each point of sale whenever some value gets added. The Central or state governments collect the tax amounts on inter-state sales. It is commonly called VAT. 4. Custom Duty: It is a tax levied on the products which get imported into India. In some cases, it is also applicable to the products that get transported out of India. 5. Stamp Duty: Stamp duty tax gets levied on the transfer of immovable property located within the state. It is charged by the government and varies in rate. It’s also applicable to all legal documents. 6. Entertainment tax: The state government charges this tax on all financial transactions related to entertainment. Examples include movie shows, video games, arcades, sports activities, amusement parks etc. 7. Securities Transaction Tax: It is a tax levied at the time of trade of securities through the Indian stock market. 2/5

  3. Distinguish between direct tax and indirect tax Difference between Direct & Indirect Tax Factor Direct Tax Indirect Tax Tax Imposition Direct tax is imposed on income and profits. Indirect Tax is imposed on goods and services. Passage of payment These taxes are paid directly to the government. The customers pay indirect taxes as a part of the good/service price. Therefore, the tax is paid to the middleman so it is the responsibility of the middleman to pay the taxes to the government. Tax Rates Tax rates are dependent on the income bracket of the individual. The tax rate is the same for one and all. Procedure of payment Taxes are paid to the Income Tax department whenever the window opens. These taxes are simply paid to the middleman at the time of payment of the good or service. Ease of collection Complex Fairly easy Tax bearer Individuals and businesses End consumers Examples Income Tax, Securities Tax Excise duty, VAT Advantages of Indirect Tax: 3/5

  4. Contribution of the poor: The population of the country that is less economically stable gets exempted from direct taxes. However, even the poor need to pay indirect taxes for goods and services. They can help towards the progress of the country that way. Equitable: Indirect taxes are charged or levied on the society on goods and services consumed and used by the rich people mostly. The luxury tax is another example of equitable taxation. Convenient: Indirect tax is typically charged in small amounts and is paid only while making purchases. The final price of the product or service includes the amount of the indirect tax. Collection of tax happens when goods are sold and purchased. It also requires minimal effort on the part of the government. Broad-based: Indirect taxes are opened up evenly on a good range of products and services. In this manner, the taxpayer does not get burdened by complex direct taxation that could impact their economic and social life. Disadvantages of Indirect Tax : Regressive : Since there are several indirect taxes, the poor have to pay the same tax rate as the rich on several items. It increases the gap between the rich and the poor. For instance, the salt tax is applicable for everyone equally. Thus, implying that the rich and the poor need to pay an equivalent amount. However, the impact of this tax is going to be more on the poor than the rich. Raises prices unduly: The method of indirect taxes is usually cumulative. On a point- based transaction system, every middle-man tends to charge their service tax, leading to an increase in the worth of the commodity. Read Related Articles CA Final Exam Pattern CA Final Subjects & Syllabus CA Final SFM GOLDRATT Theory Of Constraints CA foundation syllabus CA Foundation Registration FAQs CA Inter Exam Pattern and Syllabus Customs Laws & Duty Drawback 4/5

  5. Takshila Learning is one of the best choices for online CA foundation Classes and the entire CA Program— CA Foundation, CA Intermediate, and CA Final. Takshila Learning provides Online classes for CA Foundation and video lectures for the CA Course that are based on the newest ICAI Syllabus and taught by India’s greatest professors. The main objective of Takshila learning is to assist students in passing their tests and becoming CAs with good scores in their first attempt itself. Call at 8800999280 / 8800999283 / 8800999284 fill the form for any other details: Tags: indirect tax, difference between direct and indirect tax, direct tax and indirect tax, indirect tax examples, direct and indirect tax, what is indirect tax , indirect tax meaning, difference between direct tax and indirect tax, types of indirect tax Leave a Message Required fields are marked * 5/5

More Related