Stating the Distinctions Between Direct and Indirect Taxes
The distinctions between the indirect tax and direct tax can be complicated for it certainly depends on whether the person asks from the “economic” or “legal” perspective. These are the two concepts that divide the relevance between direct and indirect taxes. But with the aid of information presented by the government, people are all enlightened and guided about these concepts.
From the economic perspective, the direct taxes refer to the levies both collected and imposed on the particular organizations or group of people. The best example for it is the collection of taxes from certain individuals who are actually earning their income. In terms of indirect taxes, these are collected from specific organizations or somebody other than an entity or person that typically responsible for taxes. The sales tax will never be considered as the direct tax due to the fact that the money is been collected from the merchants, and not from the individuals who are paying the tax.
When it comes to the legal perspective, the meaning of an indirect and direct taxes has both differences. For the direct tax, it is applied only to poll and property taxes. These taxes are judged on existence or simple ownership. On the other hand, the indirect taxes have been imposed upon a wide variety of abstract ideas which include activities, privileges and rights.
The tax on the property sale will be considered as indirect taxes while the tax owed on a property is direct. Now that people already have the idea about the direct and indirect tax distinctions, they can now easily understand other concepts related to it.
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Indirect Taxes Provides Both Merits and Demerits
Indirect taxes are one wherein the burden may be transferred to others. In this situation, the taxpayers are not the bearer of the tax. The incidence and impact of these indirect taxes vary from person to person. An indirect tax is usually collected and levied from one person who has the ability to shift it to other people whom the true tax burden falls.
Direct and indirect tax is classified according to the administrative arrangement basis. In terms of direct taxes, there is a present direct relationship in between the revenue authorities and taxpayers. The agency that manages the tax collection collects the taxes directly from the taxpayer. In the case of indirect taxes, there will be no direct relationship in between the revenue authorities and the taxpayers. They are usually collected through manufacturers and traders.
The main benefits provided by indirect taxes include convenience, difficulty to evade, elasticity, universality, wide coverage, and social welfare, buoyancy and flexibility, and production pattern influence. They do not affect motivation to save and work. Many people acknowledge and appreciate the merits that they received from indirect taxes.
On the other, this kind of tax has also demerits for some developed and even underdeveloped countries. Some of them include the higher cost of collection, affects consumpti8on, increase in income inequalities, inflationary, uncertainty, lack of social consciousness, and tax evasion possibility.
Elaborating the advantages and disadvantages of indirect and direct taxes clarifies the fact that direct taxes have been generally progressive while the indirect tax nature is regressive. The raising revenue scope with the aid of direct taxation is bounded and there is no actually escape from the indirect taxation despite the attendant problems.
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Guide to Indirect Tax and Budget for India 2013 has been Presented
Basically, the budget for 2013 and the issue about indirect taxes are both providing significant roles in the overall history of a particular government. The presentation is given as the proposal and the impact. For people who are already aware of this information, it is a special opportunity for them to become knowledgeable about these concepts.
The primary entry in the Indian indirect tax proposal is for the custom duty free threshold allowance of jewelry from the Indian passengers who are residing abroad for more than one year. For its impact, the NRIs or Non-resident Indians residing abroad for more than one year including foreigners who transferred residence to India enjoy the hassle free immigration. They may import various jewelry that result in custom duty saving of Rs 28, 840 and Rs 14, 420 for both female and male passengers respectively.
For the initial excise duty on the marble block, it also increased from Rs 30 per square meter to Rs 60 square meter. The impact is that the households searching to upgrade the marble flooring for a two-BHK with the carpet area of about 1, 000 square feet must pay an extra amount of Rs 4, 000.
Moreover, the agreement on service tax to purchase any under construction unit priced residential structure or unit that has a carpet area of approximately 2, 000 square feet has increased from an effective rate of 3.09 percent to 3.71 percent. The impact is that purchasing a house in the upmarket Bandra costing Rs 3 crore is more expensive by Rs 1.86 lakh.
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