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Tax is a mandatory fee imposed upon individuals or corporations by the Central and the State Government to help build the economy of a country by meeting various public expenses.
Taxes are broadly divided into two categories- Direct and Indirect taxes.
It is a tax levied directly on a taxpayer who pays it to the Government and cannot pass it on to someone else.
Some of the important direct taxes imposed in India are mentioned below:
However, both Estate and Wealth taxes are now abolished.
Direct taxes do have a certain advantage for a country’s social and economic growth. To name a few,
Direct taxes come with a handful of disadvantages. But, the very time-consuming procedures of filing tax returns is a taxing task itself.
It is a tax levied by the Government on goods and services and not on the income, profit or revenue of an individual and it can be shifted from one taxpayer to another.
Earlier, an indirect tax meant paying more than the actual price of a product bought or a service acquired. And there was a myriad of indirect taxes imposed on taxpayers.
Goods and Service Tax (GST) is one of the existing indirect tax levied in India. It has subsumed many indirect tax laws.
Let’s discuss a few indirect taxes that were earlier imposed in India:
With the implementation of GST, we have already witnessed a number of positive changes in the fiscal domain of India. The various taxes that were mandatory earlier are now obsolete, thanks to this new reformed indirect tax. Not just that, GST is making sure the slogan “One Nation, One Tax, One Market” becomes the reality of our country and not just a dream.
That said, with the dawning of the ‘Goods & Services Tax (GST), the biggest relief so far is clearly the elimination of the ‘cascading effect of tax’ or the ‘tax on tax’ quandary.
Cascading effect of tax is a situation wherein the end-consumer of any goods or service has to bear the burden of the tax to be paid on the previously calculated tax and as a result would suffer an increased or inflated price.
Under the GST regime, however, the customer is exempted from the tax they would otherwise pay as a result of the cascading effect.
There are several other benefits of GST. Let’s list a few:
On a larger perspective, we can agree that both direct and indirect taxes are important for the betterment of our economy.