Indirect tax is the tax levied on the consumption of goods and services. It is not directly levied on the income of a person. Instead, he/she has to pay the tax along with the price of goods or services bought by the seller. The person paying the tax to the government and the person bearing the liability to pay the tax are thus, two different people.

Indirect tax is the tax levied on a person upon consumption of goods and services. Indirect tax is not directly levied on the income of a person. He needs to pay the tax in addition to the actual price of goods or services purchased by the seller. Indirect is a tax that is passed on to another person. Generally, indirect tax is levied on sellers who pass it on to the final consumer.

In contrast to direct taxes, indirect taxes are taxation on an individual or entity, which is ultimately paid for by another person. The body that collects the tax will then remit it to the government. With direct taxes, the person immediately paying the tax is the person that the government is seeking to tax.

Excise duties on fuel, liquor, and cigarettes are all considered examples of indirect taxes. By contrast, income tax is the clearest example of a direct tax, since the person earning the income is the one immediately paying the tax. Admission fees to a national park are another example of direct taxation.

Indirect taxes are commonly used and imposed by the government to generate revenue. They are essentially fees that are levied equally upon taxpayers, no matter your income, so rich or poor, everyone has to pay them.

There are different types of indirect taxes in India. Listed below are some popular examples of indirect taxes, explained in brief:

•  GST TAX:   The advent of GST has transformed the dynamics of indirect taxation in India by integrating a majority of the erstwhile indirect taxes. Since GST is a newly enacted legislation it is at an evolutionary stage where it is utmost important to keep track of the dynamic changes as well as evaluate the impact of such changes on the business environment. Although the erstwhile indirect taxes have been integrated with GST, it is relevant to keep track of the pending unresolved matters under the pre-GST regime.
•  Excise Duty:   This is paid for the manufacturing of goods. For example, if a person manufactures cars, he is liable to pay excise duty on manufactured cars.
•  Value Added Tax (VAT):   This is paid on the value addition in price during the sale of goods. For example, when the wholesaler sells goods to a retailer.
•  Custom Duty:   This is paid on the goods imported from outside India.
•  Stamp Duty:   This is paid on the sale of immovable property. Also, stamp duty is mandatory on all types of legal documents.
•  Entertainment Tax:   This is levied on every transaction related to entertainment. For example, movie tickets, video game arcades, stage shows, exhibitions, amusement parks, and sports-related activities.

In India, there are many different Indirect Taxes which are applicable on different kinds of goods, imports, manufacturing and services. Indirect Tax has some defining characteristics. These are as follows:

•  Charged on Commodities:   Indirect taxes are charged on material things such as goods and services. These are not levied on the income you earn.
•  Shifts the Burden of Tax:   Sellers of the goods are required to pay the indirect taxes to the government. But they transfer the liability to their consumers.
•  Tax Evasion:   Indirect taxes are already included in the price of the commodities. Thus, when you buy goods or a service, you automatically pay your share of the tax. This can thus help to reduce tax evasion.
•  Paid by the Consumer:   The liability of indirect tax is passed on by the sellers to the consumers. This tax is thus charged at the point of sales and is paid by the customers.
•  Revenue for Government:   Since this type of tax cannot be easily evaded and is applicable on most of the commodities, it serves as a major revenue source for the govt. Its contribution is higher than the direct tax.
•  Consumer is not Directly Affected:   The main cause of direct tax evasion is that it is charged on the income directly. Indirect taxes face no such problem as they are not directly affected.

Indirect Tax ConsultancyIndirect Taxation is an essential aspect and a major requirement for doing business in India and its importance cannot be undermined or ignored. Indirect taxes are a category of taxes that are transferred to another person or entity. Typically, they are imposed on manufacturers or suppliers who subsequently pass on the tax burden to the ultimate consumer. Instances of indirect taxes consist of sales tax, entertainment tax, excise duty, and more. These taxes are imposed on sellers of goods or providers of services, and they are then conveyed to the end consumer in the form of service tax, excise duty, customs duty, and so on. A prevalent illustration of an indirect tax is the excise tax enforced on alcohol.

Although a significant portion of indirect taxes has been consolidated under the GST system, businesses are still required to address the remaining indirect taxes from the previous regime. This includes handling legacy issues, undergoing assessments, audits, and responding to inquiries from the tax department, among other related matters.

The experienced professionals at FINANCETAXSERVICES.COM have extensive knowledge and practical experience in both earlier indirect tax systems and the current GST regime. We are well-equipped to assist clients in devising effective transaction plans considering the implications of indirect taxes or GST. We provide valuable insights, offer opinions, and prepare appropriate responses to department notices. Additionally, they offer guidance and support throughout the tax refund process, helping to expedite day-to-day business operations and ensure the smooth functioning of the organization.

•  GST advisory services
•  Advising on GST implications on the proposed transactions and arrangements as well as structuring the proposed transactions and arrangements to make them tax efficient
•  GST due-diligence and health checks for identification of tax optimization opportunities, streamlining the tax compliance, and reducing the tax exposures
•  Analyzing the impact of GST on tenders pre-bid/post bid
•  Assisting in seeking advance rulings including filing the application and appearing before the advance ruling authorities
•  Undertaking GST audits and reconciliations and other compliances under GST laws
•  Assisting in filing and processing of refund claims
•  Undertaking GST audits and reconciliations and other compliances under GST laws

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