Page 7 - DCOM308_DCOM502_INDIRECT_TAX_LAWS
P. 7

Indirect Tax Laws




                    Notes          levied on and collected from  a person who manages  to pass  it on  to some other person or
                                   persons on whom the real burden of tax falls. For example commodity taxes or sales tax, excise
                                   duty, custom duties, etc. are indirect taxes.


























                                   Source:  http://kalyan-city.blogspot.in/2010/12/indirect-tax-meaning-merits-and.html

                                   1.1.1 Advantages/Merits of Indirect Taxes

                                   The merits of indirect taxes are briefly explained as follows:
                                   1.  Convenient: Indirect taxes are imposed on production, sale and movements of goods and
                                       services. These are imposed on manufacturers, sellers and traders, but their burden may
                                       be shifted to consumers of goods and services who are the final taxpayers. Such taxes, in
                                       the form of higher prices, are paid only on purchase of a commodity or the enjoyment of
                                       a service. So taxpayers do not feel the burden of these taxes. Besides, money burden of
                                       indirect taxes is not completely felt since the tax amount is actually hidden in the price of
                                       the commodity bought. They are also convenient because generally they are paid in small
                                       amounts and at intervals and are not in one lump sum. They are convenient from the point
                                       of view of the government also, since the tax amount is collected generally as a lump sum
                                       from manufacturers or traders.

                                   2.  Difficult to Evade: Indirect taxes have in-built safeguards against tax evasion. The indirect
                                       taxes are paid by customers, and the sellers have to collect it and remit it to the Government.
                                       In the case of many products, the selling price is inclusive of indirect taxes. Therefore, the
                                       customer has no option to evade the indirect taxes.

                                   3.  Wide Coverage: Unlike direct taxes, the indirect taxes have a wide coverage. Majority of
                                       the products  or services  are subject  to indirect taxes. The consumers or users of such
                                       products and services have to pay them.

                                   4.  Elastic: Some of the indirect taxes are elastic in nature. When government feels it necessary
                                       to  increase its revenues, it  increases these taxes. In  times of prosperity indirect taxes
                                       produce huge revenues to the government.
                                   5.  Universality: Indirect taxes are paid by all classes of people and so they are broad based.
                                       Poor people may be out of the net of the income tax, but they pay indirect taxes while
                                       buying goods.





          2                                 LOVELY PROFESSIONAL UNIVERSITY
   2   3   4   5   6   7   8   9   10   11   12