In-direct Taxes
In-direct Taxes
Taxes imposed on products and services as opposed to income or profits are known as indirect taxes. The end users, who are ultimately responsible for paying the taxes, have intermediaries (such retailers or service providers) collect these taxes from them. Examples include excise duty, a tax on items like alcohol, tobacco, and gasoline, often added to the price; VAT (Value Added Tax) and sales tax, which are taxes on goods and services sold; and customs duty, a tax on imports and exports meant to control trade and protect local businesses. Since 2019, GST (SGST, CGST, UTGST) is collected by the central, state, & union territory governments as indirect taxes.
The concept of indirect taxation is simple: retailers, wholesalers, or service providers act as intermediaries for the government. They collect taxes from customers & then send those taxes to the government. Any customer who buys the goods will be subject to taxation. Indirect taxes are frequently included in the cost of goods and services, where they are less obvious to customers than direct taxes.
Governments are guaranteed a consistent source of income by the imposition of indirect taxes on a broad range of goods and services. Indirect taxes, which tax expenditure rather than income since they are focused on consumption, might promote investment and savings. Since companies collect the tax at the point of sale and send it to the government, collection is generally simple.
While indirect taxes are given special consideration since they benefit the government as a whole, they can also be regressive, disproportionately harming those with lower incomes who spend a greater percentage of their income on products and services subject to taxes. The cost of products and services may rise as a result of indirect taxes, fueling inflation.
Indirect taxes are a key source of income for governments, helping fund public services & infrastructure. They are easier to collect and cover a wide range of goods, but they can also increase prices and impact lower-income groups more. It's important for both consumers & lawmakers to understand how these taxes work and what they mean for everyone.