What are Direct Taxes and Indirect Taxes?

What are Direct Taxes and Indirect Taxes?

Tax makes the major revenue of the government of India. From the expenditure, allocation of various expenditures, fiscal deficit and other decisions of the government depends mostly on the Tax, that is both direct and indirect tax collections. Approximately 50% of the revenue is contributed to the government by the tax collection, among which the major portion is occupied by GST and Corporate Tax Account. We can expect still more revenue from the tax but only 10% or less than that people are paying their tax to the government, if all the citizens clear their tax completely the revenue could be estimated still more be it a direct tax or indirect tax.

Direct Tax:

It is the tax that is directly levied on the taxpayers be it a salaried person or any corporate industry or companies depending upon the income and wealth and income, respective tax is levied directly by the government. These taxes are directly collected and imposed by the Central government. Though the central government the main in charge of the tax collection oversees the Income Tax Department. This tax is non-transferable, that means taxpayers cannot pass direct taxes liabilities on to others either on to another individual or to any corporation. There are many different types and categories of direct taxes in India and the most important types are the corporate tax, wealth tax and the capital gain tax.

Indirect Tax:

Unlike the direct tax that is directly imposed on the individual’s income or on corporate, indirect tax is levied by the government on goods and services. Also, it has the facility to shifted to another taxpayer from one to another which is not allowed in case of direct taxes. GST or the Goods and Services Tax is the indirect tax structure in India, the GST Act came into origin in the year of 2017 on 1st of July and with its origin it has replaced many direct taxes such as the excise duty, VAT, service taxes and others. GST is the single domestic indirect tax law of India. GST has made positive regimes such as with its origin it has eliminated the tax on tax with which the cost of the good is lowered, which helped positively the Indian manufacturers and suppliers.

What are the components of GST?

  • CGST - It is collected by the central government on Intra-state sale.
  • SGST - It is collected by the State government on intra-state sale.
  • IGST - It is collected by Central government on inter-state sales.