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Indirect Tax in India

Indirect tax is a tax levied on the expenses done by a person. It is the same for all the people. The burden to pay can be easily shifted to the end customer.

Taxes in India are broadly categorised into direct tax and indirect tax. The tax which is imposed on the income of an individual is known as the Direct tax, like Income Tax, Gift Tax, Surcharge, etc.

Indirect Tax is not directly imposed on an individual. It is levied indirectly on the expenses incurred by a person. The burden to pay can be easily transferred to the other person, and that's why it is called an indirect tax. The tax is levied on the service provider or the goods seller, which is passed on to the ultimate consumer.

Indirect tax is imposed at the same rate for everyone irrespective of the income earned by a person. Indirect taxes in India can be bifurcated into the following:

  1. Service Tax imposed on the services rendered.
  2. Excise Duty imposed on the manufacturing.
  3. Customs Duty imposed on the import and export of goods.
  4. Value Added Tax imposed on the value added at the time of production of goods.
  5. Central Sales Tax imposed on the interstate transfer of goods.

Note: The whole Indirect tax structure of India will change will the implementation of the Goods and Service Tax (GST).