Features of Indirect Tax

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Dr.S.NAGALINGAM,

M.Com., M.Phil., P.G.D.C.A., Ph.D.,

Assistant Professor,

PG & Research Department of Commerce,

Cardamom Planters’ Association College,

Bodinayakanur.

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�FEATURES OF INDIRECT TAX�

In India, there are many different Indirect Taxes which are applicable on different kinds of goods, imports, manufacturing and services. Indirect Tax has some defining characteristics. These are as follows:

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�1. Charged on Commodities�

Indirect taxes are charged on material things such as goods and services. These are not levied on the income you earn.

2. Shifts the Burden of Tax

Sellers of the goods are required to pay the indirect taxes to the government. But they transfer the liability to their consumers.

3. Tax Evasion

Indirect taxes are already included in the price of the commodities. Thus, when you buy goods or a service, you automatically pay your share of the tax. This can thus help to reduce tax evasion.

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�4. Paid by the Consumer�

The liability of indirect tax is passed on by the sellers to the consumers. This tax is thus charged at the point of sales and is paid by the customers.

5. Revenue for Government

Since this type of tax cannot be easily evaded and is applicable on most of the commodities, it serves as a major revenue source for the govt. Its contribution is higher than the direct tax.

6. Consumer is not Directly Affected

The main cause of direct tax evasion is that it is charged on the income directly. Indirect taxes face no such problem as they are not directly affected.

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Benefits of Indirect Tax

Indirect tax provides many benefits which are not available in the case of direct taxes.

1. Helps Maintain Equity

Indirect taxes are very equitable. The tax depends on the cost of the goods. The higher the price of the goods the more can be the indirect taxes involved. Thus, the people who can purchase high-priced goods pay higher indirect taxes.

2. Easy to Pay/Collect

Indirect taxes are easy to pay for both taxpayers and the authorities. For the tax-payers: While making payment of direct taxes, you need to file an income tax return statement, though it can be done by yourself, it generally requires a Chartered Accountant. But in case of Indirect Taxes, there is no such need as it is paid when you purchase a good.

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�3. Convenient�

While calculating the income, there are 5 heads to go through. It should include all the earnings you have made; this is the reason why people evade income tax. But indirect taxes provide you convenience as these are collected on point of sales, i.e., when you purchase.

4. Limit Harmful Consumption

Commodities that are harmful to our health such as tobacco, wine, etc include the highest indirect tax. This makes them highly expensive. The high cost of goods helps limit their consumption.

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�5. Has a Broader Scope�

Indirect taxes are levied on a range of products and services. It is not the case that some brands incur taxes and some don’t. Also, unlike direct taxes, where it is a one-time payment that is high, indirect taxes are paid as and when you purchase and are much smaller in amount.

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