INDIRECT TAXES

1. AN INTRODUCTION INDIRECT TAXES

2. INTRODUCTION Tax is the amount paid by persons staying within a territorial limit of a Sovereign state and is levied on individuals, goods, property, business, services etc. Taxes are compulsory exaction of money by public authorities enforceable by law and does not mean payment for services rendered It is used for public purposes Refusal to pay a tax is a punishable offence. A tax is payable regularly and periodically as determined by the taxing authority.

3. TAXATION OBJECTIVES

4. KEY & SUBSIDIARY OBJECTIVES

5. CLASSIFICATION OF TAXES • PROGRESSIVE TAXATION- A tax is called progressive when with increasing income, the tax liability not only increases in absolute terms, but also it increases as a proportion of income. • PROPORTIONAL TAXATION- If the tax liability increases in the same proportion as the increase in the tax-payers income, it is known as proportional taxation. All incomes are taxed at a uniform rate. • REGRESSIVE TAXATION- If the tax liability as a proportion of income falls with the increase in tax payers income, it is regressive taxation. The poorer sections of society pay tax at higher rates than the rich. • DEGRESSIVE TAXATION- In this case, there is a declining degree of progression as the tax base increases. The rate of tax increases up to a certain limit beyond which a uniform rate is charged.

6. DIRECT TAXES • Direct tax is a tax which is paid by the person on whom the tax has been imposed. It means that he cannot transfer the liability of tax on some other person. • The IMPACT and INCIDENCE of tax falls on the same person. The term IMPACT here means he who has to pay & INCIDENCE means who ultimately pays. • Examples are income tax, wealth tax, gift tax etc

7. INDIRECT TAXES • Indirect taxes are those taxes the burden of which by nature is shifted and which are paid by tax payer directly i.e. while purchasing goods and commodities, paying for services etc. • The Impact is on one person and incidence on another eg. Sales tax is paid by seller who collects it from buyer. • Examples are Central Excise Duty, Customs Duty, Central sales tax, Service tax, value added sales tax, octroi, interest tax.

8. FEATURES OF INDIRECT TAX • Shifting of tax burden • Commodity taxation • Ability of tax payer is indirectly determined • No direct pinch to the taxpayer • Easier to collect, greater amount of generation of revenue, tax evasion is comparatively less. • Taxes directly affects the price of commodities.

9. DIRECT TAXES vs INDIRECT TAXES