Budget 2023 | What is indirect tax?

With just a few weeks left for Union Finance Minister Nirmala Sitharaman to present Budget 2023, people would be expecting tax sops.

Talking about Budget, here’s an explainer on what Indirect tax means.

The government taxes people on various levels, mainly through two channels: direct and indirect taxes. Direct taxes fall on individuals and corporations based on their earnings, called income tax and corporate tax. Property tax is yet another type of direct tax.

Then what is Indirect Tax?

Indirect taxes are imposed on goods and services. They are paid by consumers indirectly at the time of buying goods and services. Tax is levied on the seller of goods and service providers but often gets passed on to the end consumer and hence the consumer bears the tax. An indirect tax is levied at the same rate for everyone irrespective of their income. Service tax, excise duty, entertainment tax, customs duty, securities transactions tax, stamp duty are some of the widely applied indirect taxes.

GST Council is the decision-making body for the Goods and Services Tax and the Union Budget has nothing to do about it. GST is mentioned in an invoice when a purchase is made.

The Centre’s main source of indirect tax is with the help of GST.