What is Indirect Tax?
Tax that has an impact on the income and property of individuals and companies through their consumption expenditure is known as Indirect Tax. For example, GST (Goods and Services Tax). The features of Indirect Tax are as follows:
- Indirect Tax is imposed on goods and services.
- The liability to pay tax and the actual burden of the tax lie on different persons. It means that one can shift the burden of paying taxes on others. For example, the liability to pay GST to the government is on the seller. However, the actual burden of the tax lies on consumers because the sellers collect the tax from them.
- Indirect Taxes can be avoided. It is compulsory to pay indirect taxes. However, one can avoid indirect taxes by not entering into the transactions which call for these taxes.
- For example, one can purchase Khadi Gram Udyog items to avoid paying taxes, as there is no indirect tax on khadi items.
Difference between Direct and Indirect Tax
Direct and Indirect Tax are two types of taxes imposed on the property and income of individuals and companies, which is paid by them directly and indirectly to the government respectively.
Table of Content
- What is Direct Tax?
- What is Indirect Tax?
- Difference between Direct Tax and Indirect Tax
- How to Determine Whether a Tax is Direct or Indirect?
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