What is Indirect Tax

An indirect tax is one that is not paid directly by a person to the government but collected by an intermediary and passed on to the government. Indirect taxes are imposed on goods and services on the basis of production, supply, sale or purchase of products or provision of services, in the form of goods and services tax (GST).

 

GST, rolled out in 2017, replaced various indirect tax laws that previously existed in India, such as import and export duty, excise, sales tax, value-added tax (VAT), service tax, entertainment tax, electricity duty, tax on passenger fares, freights etc.

 

How are indirect taxes collected?

 

An indirect tax is collected from the consumer by an intermediary, such as manufacturer, trader or service provider. The intermediary files a tax return and forwards the tax proceeds to the government with the tax return. The consumer bears the final economic burden of the tax by paying more for the product.

 

By comparison, direct taxes are imposed on persons and collected by the government directly from those on whom they are imposed.

 

In indirect taxation, the obligation of tax payment varies from one consumer to another, as these taxes are levied by the government on goods and services — not on the income, profit or revenue of an individual. These taxes can be shifted from one taxpayer to another. This is unlike direct taxes, which are borne by the person on whom the tax is levied.

 

What is GST?

 

GST was rolled out on July 1, 2017, as India’s most comprehensive indirect tax reform. It consolidated multiple indirect tax that existed previously into a single one. The implementation of GST aimed to make the indirect tax system more unified across the many states of the country. Read more... (https://www.business-standard.com/about/what-is-goods-and-services-tax)