Indirect taxes are charges levied on manufacturers and producers by the government of a country but are ultimately collected from the consumers for the purchase of their goods or services. Indirect taxation is levied on the expenses incurred by the taxpayer, not on their income.
Taxes are borne by the consumer at the time of purchase of the goods or service. The manufacturer or service provider collects the indirect tax on behalf of the consumer and transmits it to the government with the tax return.
In India, indirect taxes are collected in a variety of ways. Take a look at the indirect taxes listed below.
Service Tax
Services taxes are levied by the central government on the service provider for the services delivered by them. Despite the fact that the tax is paid by service providers, It can be reimbursed from the customers who purchased or used the taxable services. Individual service providers are billed on a cash basis, whereas businesses are billed on an accrual basis.
Excise Duty
Excise duty refers to the taxes levied on the manufacture of goods for their production, licensing, and sale within the domestic country levied at the time of removal of goods. It is mandatory to pay duty on all goods manufactured unless exempted. Excise duty is also known as the Central Value Added Tax (CENVAT)
Customs Duty
Customs duty is levied on goods transported across boundaries of India, it is levied on both import and export of goods. The tax levied on the import of goods is called an import duty and the tax levied on the export of goods is called an export duty. The government imposes customs duty to regulate the movement of goods, restrict transaction of prohibited goods, to protect the country's economy, environment, and other resources from being exploited.
Sales Tax
Sales tax is a consumption tax, imposed on the sale of goods within India. A percentage of the value of the merchandise is generally charged at the time of purchase or exchange for certain taxable products. Sales taxes are collected in various forms such as retail sales tax, use tax, wholesale tax, manufacturers’ sales tax, and value-added tax.
Entertainment Tax
The government imposes entertainment tax on entertainment activities, such as movies, exhibits, trade fairs, arcades, celebrity stage performances, Teatro or stage play, video games, events relating to sports, amusement parks, and other large-scale commercial displays. In India, the authorities in charge of collecting entertainment tax from clients are the state governments. Certain aspects of the entertainment tax provisions vary by state because it is administered by the state governments.
Securities Transaction Tax
Securities transaction tax commonly known as (STT) refers to taxes levied on the acquisition or sale of shares, bonds, debentures, equity-oriented mutual funds (MFs), and other exchangeable securities listed on the National stock exchange of India. It is collected by the transaction's intermediary, such as the broker. As it is imposed on the broker rather than the investor/trader directly. The broker, in turn, collects it from its clients and deposits it with the government.
Contemporarily, Since the implementation of GST in India, indirect taxes have evolved into the single goods and services tax, reducing the time and hassle associated with compliance.
In 2017, the Indian government enacted the Goods and Services Tax (GST) Act. To consolidate numerous indirect taxes schemes into a single taxation system. GST is levied on the delivery of products and services from the producer to the customer, effectively replacing various indirect taxes such as service tax, entertainment tax, excise duty, and customs duty.
GST is furthermore categorized based on states and union territories,
