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“INDIRECT TAX CONCEPT”
M.Com 2nd Semester,
Lucknow University
Submitted By:-
Dhananjay Singh
.
INDIRECT TAX
• Concept
• Objective
• Features
• Advantages & Disadvantages
Indirect Tax
Concept
• Indirect taxes are those whose burden
can be shifted to others so that those
who pay these taxes to the government
do not bear the whole burden but pass it
on wholly or partly to others.
• Indirect taxes are levied on production
and sale of commodities and services
and small or a large part of the burden of
indirect taxes are passed on to the
consumers.
• Excise duties on the product of
commodities, sales tax, service tax,
customs duty, tax on rail or bus fare are
some examples of indirect taxes.
.Indirect Tax
On Goods Sold On Service Provider
By Dealer By Manufacturer By Service Provider
Within State Within State Within State
VAT Excise + VAT Service Tax
Outside State Outside State Outside State
CST Excise + CST Service Tax
Outside Country Outside Country Outside Country
Customs Excise + Customs Service Tax
Objective of Indirect Taxes
• Resource Mobilization
• Reduction in Inequalities of Income
• Social Welfare
• Foreign exchange
• Regional Development
• Control of Inflation
Special Features of Indirect Taxes
1. Shilling of tan burden Nor example, Central excise duty which
is paid by the manufacturer is recovered by including such
duties and taxes in the cost of the commodity.
2. Indirect taxation is commodity taxation as the central excise
levy is made in respect of commodities manufactured in any
part of India.
3. While imposing direct taxes, the ability of the tax-payer
lesseesee is directly determined, whereas in respect of
indirect taxes, the ability of tax-payer is indirectly determined
.
4. The tax-payer does not perceive a direct pinch while paying
indirect taxes.
5. Indirect taxes are easier to collect and greater amount of
generation of revenue is assured as tax evasion is
comparatively less in the case of organized sector.
6. Tax imposed on commodities directly affects the prices of
commodities.
7. Indirect taxes include Central Excise Duty, Customs Duty,
Central Sales Tax, Service Tax, State VAT, Octroi, Interest Tax,
Expenditure Tax, Foreign Travel Tax, etc.
Advantages
1. Convenient Indirect taxes are more convenient to pay. These taxes,
generally being on commodities, are wrapped up in prices.
2. Disguised : The effect of indirect taxes does not provoke resentment,
because they cause less annoyance to the public as these taxes are not
felt directly.
3. Not Easily Evadable : Indirect taxes are difficult to evade as they are
usually merged with prices.
4. Broad-based : Indirect taxation usually being commodity taxes has a
broader scope. The low income strata of society which are exempt from
direct taxes can be easily caught in the net of such tax.
.
5. Social Value : Indirect taxes have a high social value. They can serve
to improve social morale and public health by discouraging
consumption of such harmful commodities as intoxicants, tobacco, etc.
6. Forced Savings : Indirect taxes are an effective means of mopping up
consumer's surplus and thereby diverting the saving potential of the
community at large into the hands of the government.
7. Complementary : Additional revenue can be easily obtained by
introducing an indirect tax. Indirect taxes in fact can serve as
complementary to direct taxes.
8. Progressive : Indirect taxes on luxuries and semi-luxuries are
progressive in effect, as they fall on the rich people's consumption
outlays
Disadvantages
1. Inequitability : Indirect taxes are unjust and inequitable as they are
regressive in effect. Since they are charged at a proportional rate on
commodities of general consumption.
2. Less Productive: Indirect taxes do not conform to the canons of
economy and productivity. As these taxes involve many stages, the
cost of collection is usually high in relation to the revenue yielded.
3. Inflationary Potentiality : Indirect taxes prove to be inflationary
when excessively relied upon. In India, for instance, excessive indirect
taxation on commodities of mass consumption may be blamed as
being an important factor contributing to the inflationary price spiral
in the country.
.
4. Disincentive Effect on Savings Indirect taxes discourage savings
when the people have to spend more with a rise in the prices of
commodities.
5. No Educative Value : Indirect taxes being invisible, and as they are
collected through middlemen like traders, hence, they do not
promote any civic sense.
THANK YOU

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Indirect Tax Basic

  • 1. “INDIRECT TAX CONCEPT” M.Com 2nd Semester, Lucknow University Submitted By:- Dhananjay Singh
  • 2. . INDIRECT TAX • Concept • Objective • Features • Advantages & Disadvantages
  • 3. Indirect Tax Concept • Indirect taxes are those whose burden can be shifted to others so that those who pay these taxes to the government do not bear the whole burden but pass it on wholly or partly to others. • Indirect taxes are levied on production and sale of commodities and services and small or a large part of the burden of indirect taxes are passed on to the consumers. • Excise duties on the product of commodities, sales tax, service tax, customs duty, tax on rail or bus fare are some examples of indirect taxes.
  • 4. .Indirect Tax On Goods Sold On Service Provider By Dealer By Manufacturer By Service Provider Within State Within State Within State VAT Excise + VAT Service Tax Outside State Outside State Outside State CST Excise + CST Service Tax Outside Country Outside Country Outside Country Customs Excise + Customs Service Tax
  • 5. Objective of Indirect Taxes • Resource Mobilization • Reduction in Inequalities of Income • Social Welfare • Foreign exchange • Regional Development • Control of Inflation
  • 6. Special Features of Indirect Taxes 1. Shilling of tan burden Nor example, Central excise duty which is paid by the manufacturer is recovered by including such duties and taxes in the cost of the commodity. 2. Indirect taxation is commodity taxation as the central excise levy is made in respect of commodities manufactured in any part of India. 3. While imposing direct taxes, the ability of the tax-payer lesseesee is directly determined, whereas in respect of indirect taxes, the ability of tax-payer is indirectly determined
  • 7. . 4. The tax-payer does not perceive a direct pinch while paying indirect taxes. 5. Indirect taxes are easier to collect and greater amount of generation of revenue is assured as tax evasion is comparatively less in the case of organized sector. 6. Tax imposed on commodities directly affects the prices of commodities. 7. Indirect taxes include Central Excise Duty, Customs Duty, Central Sales Tax, Service Tax, State VAT, Octroi, Interest Tax, Expenditure Tax, Foreign Travel Tax, etc.
  • 8. Advantages 1. Convenient Indirect taxes are more convenient to pay. These taxes, generally being on commodities, are wrapped up in prices. 2. Disguised : The effect of indirect taxes does not provoke resentment, because they cause less annoyance to the public as these taxes are not felt directly. 3. Not Easily Evadable : Indirect taxes are difficult to evade as they are usually merged with prices. 4. Broad-based : Indirect taxation usually being commodity taxes has a broader scope. The low income strata of society which are exempt from direct taxes can be easily caught in the net of such tax.
  • 9. . 5. Social Value : Indirect taxes have a high social value. They can serve to improve social morale and public health by discouraging consumption of such harmful commodities as intoxicants, tobacco, etc. 6. Forced Savings : Indirect taxes are an effective means of mopping up consumer's surplus and thereby diverting the saving potential of the community at large into the hands of the government. 7. Complementary : Additional revenue can be easily obtained by introducing an indirect tax. Indirect taxes in fact can serve as complementary to direct taxes. 8. Progressive : Indirect taxes on luxuries and semi-luxuries are progressive in effect, as they fall on the rich people's consumption outlays
  • 10. Disadvantages 1. Inequitability : Indirect taxes are unjust and inequitable as they are regressive in effect. Since they are charged at a proportional rate on commodities of general consumption. 2. Less Productive: Indirect taxes do not conform to the canons of economy and productivity. As these taxes involve many stages, the cost of collection is usually high in relation to the revenue yielded. 3. Inflationary Potentiality : Indirect taxes prove to be inflationary when excessively relied upon. In India, for instance, excessive indirect taxation on commodities of mass consumption may be blamed as being an important factor contributing to the inflationary price spiral in the country.
  • 11. . 4. Disincentive Effect on Savings Indirect taxes discourage savings when the people have to spend more with a rise in the prices of commodities. 5. No Educative Value : Indirect taxes being invisible, and as they are collected through middlemen like traders, hence, they do not promote any civic sense.