Here’s all you need to know about Indirect Tax in India
Jul 28, 2019, 12:30 IST
The concept of indirect tax has been introduced in India in order to reduce the burden on the tax payers. In other words, we can say that the burden of these taxes are borne by someone else other than the taxpayer.
What is Indirect Tax?
As the name indicates, indirect tax is levied on goods and services that carry a higher price. Some of the typical examples of indirect taxes in India include service tax, value added tax (VAT), central excise and customs duty.
Different kinds of indirect taxes levied in India
Service tax
Service tax is applicable to be paid by the entities that provide services like consulting, legal assistance and other such services. This kind of tax is collected from the recipients of the services and paid to the Central Government. Starting from June 1, 2016, service tax was fixed at 14% along with Swacch Bharat Cess (0.5%) and Krishi Kalyan Cess (0.5%). Thus the resulting rate of service tax chargeable is 15%. Small service providers who do not make more than Rs 10 Lakhs per annum are exempted from paying the service tax in India.
Excise duty
Excise duty is applied on all kinds of goods that are manufactured in India. This kind of indirect tax needs to be paid by the manufacturers and then eventually passed on to the end buyers. Excise duty is levied by the Central Government in India. This tax works based on the provisions found in the Central Excise Act, 1944.
VAT
Value Added Tax (VAT) is levied on the sale of goods that are movable within the nation. VAT is charged during all stages of production and distribution channels that include the instance of value addition. The State Governments levy this tax under Entry 54 of the State List.
Customs duty
Customs duty is a kind of indirect tax that is applicable to goods imported from other countries. This is payable towards getting some goods inside the country. In some cases, this kind of tax is also levied on exported goods. The Customs Act, 1962 contains the procedures and regulations on how the customs duty must be levied, how it must be collected and the procedures of imports and exports, penalties, offenses and prohibitions.
Securities transaction tax is levied while purchasing or selling stocks through the Indian stock exchange. Introduced in the year 2004, STT is applicable in cases of shares, mutual funds, and future and options transactions. STT was levied in order to bring down the short-term capital gains tax and eradicate the long-term capital gains tax.
Stamp duty
This kind of indirect tax is charged by the state government while movable and immovable properties are transferred within their jurisdiction. Also, stamp duty is made compulsory on all kinds of legal documents. The rates of stamp duty varies from one state to another.
Entertainment tax
Entertainment tax is yet another kind of indirect tax levied by the state government on the different kinds of transactions connected to entertainment. Some examples to entertainment taxes are movie tickets, stage shows, amusement parks, sports activities, adventures, video game arcades and others.
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What is Indirect Tax?
As the name indicates, indirect tax is levied on goods and services that carry a higher price. Some of the typical examples of indirect taxes in India include service tax, value added tax (VAT), central excise and customs duty.
Different kinds of indirect taxes levied in India
Service tax
Service tax is applicable to be paid by the entities that provide services like consulting, legal assistance and other such services. This kind of tax is collected from the recipients of the services and paid to the Central Government. Starting from June 1, 2016, service tax was fixed at 14% along with Swacch Bharat Cess (0.5%) and Krishi Kalyan Cess (0.5%). Thus the resulting rate of service tax chargeable is 15%. Small service providers who do not make more than Rs 10 Lakhs per annum are exempted from paying the service tax in India.
Excise duty
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Excise duty is applied on all kinds of goods that are manufactured in India. This kind of indirect tax needs to be paid by the manufacturers and then eventually passed on to the end buyers. Excise duty is levied by the Central Government in India. This tax works based on the provisions found in the Central Excise Act, 1944.
VAT
Value Added Tax (VAT) is levied on the sale of goods that are movable within the nation. VAT is charged during all stages of production and distribution channels that include the instance of value addition. The State Governments levy this tax under Entry 54 of the State List.
Customs duty
Customs duty is a kind of indirect tax that is applicable to goods imported from other countries. This is payable towards getting some goods inside the country. In some cases, this kind of tax is also levied on exported goods. The Customs Act, 1962 contains the procedures and regulations on how the customs duty must be levied, how it must be collected and the procedures of imports and exports, penalties, offenses and prohibitions.
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Securities Transaction Tax (STT)Securities transaction tax is levied while purchasing or selling stocks through the Indian stock exchange. Introduced in the year 2004, STT is applicable in cases of shares, mutual funds, and future and options transactions. STT was levied in order to bring down the short-term capital gains tax and eradicate the long-term capital gains tax.
Stamp duty
This kind of indirect tax is charged by the state government while movable and immovable properties are transferred within their jurisdiction. Also, stamp duty is made compulsory on all kinds of legal documents. The rates of stamp duty varies from one state to another.
Entertainment tax
Entertainment tax is yet another kind of indirect tax levied by the state government on the different kinds of transactions connected to entertainment. Some examples to entertainment taxes are movie tickets, stage shows, amusement parks, sports activities, adventures, video game arcades and others.
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