Page 22 - DCOM308_DCOM502_INDIRECT_TAX_LAWS

Unit 1: Introduction to Indirect Taxes

 The administrative costs of direct taxes are more than that of indirect taxes. Notes
 Direct taxes are more flexible than indirect taxes.
 Indirect taxes are more growth oriented than direct taxes.
 Taxes are financial levies or burden imposed by governments upon its citizens to realize
money for various purposes.

1.10 Keywords

Administrative Costs: The administrative costs of direct taxes are more than that of indirect
taxes. Direct taxes are narrow based and has many exemptions. Indirect taxes can be conveniently
collected and cost of collection is constant overtime.
Allocation Effect: The allocative effects of direct taxes are superior to those of indirect taxes.

Growth Orientation: Indirect taxes are more growth oriented than direct taxes. Direct taxes,
being progressive, reduce savings. When savings and investments are discouraged, economic
growth is adversely effected.

Service Tax: Sales tax is levied on the sale of movable goods. Most of the Indian States have
replaced Sales tax with a new Value Added Tax (VAT) from April 01, 2005.

1.11 Review Questions

1. What are the basic features of Indirect taxes?

2. Explain about Indirect Tax System in India.
3. Discuss about Indirect Taxes in Post reforms.
4. What is the difference between Direct and Indirect Tax?

5. What do you know about distributive Effect?
6. Describe about taxes on Corporate Income.
7. What do you know about Securities Transaction Tax?
8. Explain about Double Tax Avoidance treaty.
9. What do you know about Allocation Effect?

10. Describe about Customs Duty

Answers: Self Assessment

1. Tax Laws 2. Trading
3. Business 4. Indirect Taxes
5. Constitution 6. True
7. True 8. False
9. True 10. False
11. False 12. Consumer

13. Cost 14. Direct
15. Tax Structure

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