Overview Of Indirect Tax In India

Indirect taxes are levied on services and commodities and are obtained by middlemen such as manufacturers, wholesalers, and retailers. In contrast to direct taxes, which are paid to the government by people or companies, indirect taxes are passed on to the ultimate consumer as part of the final price. As a result, indirect taxes are an important part of every country's overall tax structure and revenue generating system. CA Chandan Agarwal & Co. can help you guide with the complete indirect tax knowledge.

What exactly is indirect tax?

Consumers pay these forms of taxes on their purchases, but they do not pay them directly to the government (unlike income tax). For example, when we buy a goods, we pay VAT and other taxes.

Indirect Tax Components:

• Indirect taxes are made up of numerous components, each of which performs a distinct role in the tax system. These are some examples:
• The base rate is the percentage of tax charged on the value of goods or services. It varies according on the type of tax and the tax rules of the country.
• The price of the products or services on which the tax is computed is known as the taxable value.
• Input Tax Credit: An input tax credit is a tax paid on inputs used in the manufacturing process that can be subtracted from the output tax bill.

Different types of Indirect tax

In India, there are several types of indirect taxes.

The Indian Constitution Bill includes numerous sorts of indirect taxes. We define the following terms below:

• Sales Tax: A tax levied on the selling of goods. The Union Government levies a sales tax on interstate transactions.
• Tax on Services: This is an indirect tax in which taxpayers must pay service tax on paid services. Telephone, tour operator, architect, interior decorator, advertising, health centre, banking and financial service, event management, maintenance service, and consultant service are examples of paid services.
• Value Added Tax: The state government collects this form of tax.
• Custom Duty is paid at the point of entrance into the nation, such as the airport.
• Excise Duty: This is another indirect tax that is levied on items produced in the country.
• The Goods and Services Tax (GST) is the most ambitious tax regime in India, as well as the most recent indirect tax established into the Indian constitution.