1.
Taxable Event: The indirect taxes are levied on
purchase/sale/manufacture of goods and provision of services.
2.
Incidence & Impact: In case of indirect
taxes, the incidence and impact fall on two different persons. It means the tax
burden is shifted by the supplier to the buyer or recipient of goods or
services.
3.
Regressive Taxation: The indirect taxes do
not depend on paying capacity as tax payable on commodity is same whether it is
purchased by a poor man or rich person. Therefore, indirect taxes are
regressive in nature. There are exceptions to this argument as higher taxes may
be imposed on luxury goods.
4.
Impact of Indirect Tax: The indirect tax on
goods and services increases its price. This leads to inflationary trend.
5.
Promotes Welfare: The harmful or sin
products like alcohol, tobacco, etc. may be taxed at higher rate. This practice
not only discourages consumption of such goods but also increases the revenue
of the State.
6.
Major Source of Revenue: In India, the contribution
of indirect taxes to total tax revenue is more than 50%. Therefore, it is a
major source of tax revenue for the Government.
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