There are two types of taxes in India - direct and indirect. Direct taxes are those which are charged on the income of an individual. On the other hand, indirect taxes are not levied directly on the income of an individual. Rather, they are levied through a channel of consumption.These taxes are usually levied on sellers of goods and services who pass on the tax burden to the buyers. The government collects the tax from the seller(s). Since the end consumer directly does not pay the tax to the government, hence, it is an indirect tax. Let’s learn more about the different kinds of indirect taxes in India.
In India, a consumer earlier paid several indirect taxes including sales tax, services tax, central excise duty, additional customs duty, state-level value added tax and octroi tax, among others. With the implementation of the Goods and Services Tax (GST) from 1st July 2017, almost all the indirect taxes, have been subsumed under GST. Now, all these taxes are paid as one tax called the GST.
However, there are some indirect taxes which have not been brought under the radar of GST. Customs duty, security transaction tax, building and welfare cess and electricity duty levied by local authorities and state governments are some of them.
Below is a list of indirect taxes that are levied on the supply of good and services in India, which now is taxed under the common name of GST:
1. Excise duty
Excise duty is levied on goods and services that are produced in India. This is a tax on manufacturing which is paid by the manufacturer to the government. The manufacturer distributes and passes this tax on the end consumers.
2. Value-added tax
It is a tax on the consumption of a product, and it is levied on its value when additional or margin value is added to the product during the subsequent stages of production, starting from the point of production to the point of sale. The tax goes on adding at every stage of production as per the value addition.
3. Service tax
Service tax is a tax levied on the service providers. It is levied on services like air-conditioned restaurants, accommodation provided by the hotel, inns, services provided by travel agents, cab services, cable services, etc. The idea behind service tax is similar to that of excise duty. The incidence of this tax applies to the disbursement of services.
Note that there are some taxes which are indirect in nature and have not been included under the spectrum of GST. Customs duty and securities transaction tax are two of them.
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