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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.

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