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The tax applies to the people availing of certain services and purchasing or importing certain products. Below are some of the types and advantages of indirect taxes. Advantages of indirect taxes: 1. Every individual contributes Unlike a direct tax, indirect tax involves every citizen paying the tax in a minimum amount. The indirect tax rates vary from product to product.
Every individual who is not familiar that they are paying the tax will contribute to pay it. Product control The indirect tax helps in controlling the product purchase. Adding an extra amount to the product's total price will restrict them from buying in bulk, and the chances of product unavailability will be lower. Hidden tax The payers are not familiar with paying the tax, so any tax rate variation does not aggravate the payers compared to the direct taxpayers.
Examples and types of indirect taxes 1. Sales tax People pay a certain amount for purchasing clothes, food items, and other utilities when they visit a store. This tax paid by the people is known as the sales tax. It is a one-time tax, unlike VAT tax. Custom tax The custom tax applies to the products and services that are not your county's production.
Imported products apply to the customs tax, and these taxes have higher rates than others. Sales tax is a one-time collection, and VAT is applicable at every point of product development. From raw material to the final product, different entities collect the VAT tax. Hire the best VAT consultancy in Dubai to approach better tax services and identify the VAT tax applicable to your organization or business.
What are direct taxes? Direct taxes are the taxes that a person submits directly to the government without including any third person. Direct taxes apply to a person's property, assets and money. A person possessing a certain amount and property is bound to pay tax according to rules defined by the law.
The amount of tax to pay depends on the ability of the taxpayer. The higher the paying ability of the taxpayer higher the tax amount. Advantages of direct taxes: 1. No unfair situation Direct tax is all about the payers' ability. It helps implement equity people who have a higher tendency to pay the tax are made to pay more than the people who have a low tendency.
A person's income is obvious, and one can investigate a person's income, so there are no chances that a person can exempt from paying tax and make the poor pay. Changes according to the government's need One of the main benefits of direct tax is that the government can fluctuate the tax rate. There are certain situations, and to balance the country's economic condition, the government has to take its citizen's help. Directly increase the revenue of the government.
Cons: Collection of direct taxes is complex. Evasion is quite possible. Restricts investments. What is Indirect Tax? The taxpayers pay the indirect tax to the government via intermediary and thus they are indirectly paid to the government.
Types of Indirect Taxes in India Goods and Services Tax GST : GST is the most common example of indirect tax, which has replaced an array of other indirect taxes in India such as value added tax, service tax, excise duty, purchase tax and more. GST is a single, unified and the most comprehensive indirect tax which is imposed on the goods and services on the basis of the tax slabs laid by the GST council of India.
Customs Duty: Customs duty is levied on you, if you purchase any goods and service from abroad. This duty has to be paid, irrespective whether the product has reached you by air, sea or land. Thus, customs duty is an indirect tax which is imposed to make sure that each and every product coming into India is taxed. After the introduction of GST, a huge change has come in the entire tax landscape of the country. The various indirect taxes such as VAT, service tax, sales tax and others that were mandatory earlier, have now been abolished.
Pros: Payment is very convenient for taxpayers. The collection of taxes is quite easy. Cons: Makes the goods and services expensive. Now, since we have understood the meaning and types of direct and indirect taxes of India. The table mentioned below covers all the differentiating points between direct and indirect taxes.
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