Union Budget 2025 | FAQs: What is indirect tax?

The Union Budget 2025 is scheduled to be presented in the Parliament on February 1 by Finance Minister Nirmala Sitharaman. This will be her eighth union budgets in a row.

As various industry wait for the budget, we take a look indirect tax and what it means.

What is indirect tax?

Indirect taxes are imposed on goods and services and paid by consumers indirectly at the time of buying goods and services. It is a tax applied to things that a person purchases.

Indirect taxes are levied on the seller of goods and service providers but often gets passed on to the end consumer. It can be moved around and between different people or groups involved.

The collection and administration of indirect taxes is taken care by the Central Board of Indirect Taxes and Customs (CBIC) which is governed by the Department of Revenue.

Indirect taxes are commonly used and generally imposed by the government to generate revenue. It is considered as an easy-to-collect, convenient taxation having a wide-reaching potential involving every possible buyer or consumer for a product or service.

It is levied at the same rate for every person irrespective of their income. Indirect taxes, often, considered regressive as they burden people with low incomes, making them pay the same amount of taxes as to those who fall under higher income groups.

Goods and Services Tax (GST), Value Added Tax (VAT), excise duty, entertainment tax, customs duty, stamp duty and sales tax are some of the widely applied indirect taxes.