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Indirect Tax: Definition, Types, Features and Advantages

Brief Summary of Indirect Tax with Types

What is Indirect Tax

These types of taxes are paid on Consumption by the consumer, but they do not pay directly to the government (unlike income tax). For example, we pay VAT and other taxes on purchasing a product.

Types of Indirect Taxes in India

Here are several types of indirect taxes available in the Indian Constitution Bill. We define below:

A. Value Added Tax:

This type of tax is collected by the state government. For example, if we purchase a good, then we must pay an additional tax as Value Added Tax, to the government. The VAT rate is decided based on the nature of the item and the state.

B. Custom Duty and Octroi Tax:

This tax is levied on those goods that are imported into India from outside. The Customs Duty tax is paid at the port of entry in the country as the airport. This tax rate also varies over the nature of goods. The Octroi tax is charged on the goods entering the municipality.

C. Anti-Dumping Duty:

This tax is levied when the goods are exported at a price lower than their normal price by one nation to another nation. The Central government has imposed this tax.

D. Newly Implemented Indirect Tax (GST)

Goods and services tax is the most ambitious tax regime in India and also the latest indirect tax introduced in the Indian constitution. The significance of this tax scheme is that it will subsume all the other indirect taxes prevailing in the nation. The scheme has been introduced to make a shift in the Indian economy to reduce the cascading effects of the tax duties, thereby reducing overall inflation in the market.

There are various forms of GST which have been introduced, namely:

Recommended: Meaning of SGST, IGST, CGST with Input Tax Credit Adjustment

E. Stamp Duty

Stamp duty is the tax imposed on immovable property in the state of India. The property located in the state is charged this type of tax by the state government. A stamp tax is appropriate on all legal documents.

F. Entertainment Tax

The state government levied the charge and shall apply to the products or transactions concerned with entertainment. Buying any video games, movie shows, sports activities, arcades, amusement parks, and other would count as some of the products on which the entertainment tax shall be imposed.

Features of the Indirect Tax

Below are some of the major specifications of the tax:

Benefits of the Indirect Tax

Demerits of the Indirect Tax

Below are some of the disadvantages of indirect tax:

See Also: Direct Taxes

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