Indirect Tax in General

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.

A few indirect taxes that were earlier imposed in India:

  • Customs Duty- It is an Import duty levied on goods coming from outside the country, ultimately paid for by consumers and retailers in India.

  • Central Excise Duty– This tax was payable by the manufacturers who would then shift the tax burden to retailers and wholesalers.

  • Service Tax– It was imposed on the gross or aggregate amount charged by the service provider on the recipient.

  • Sales Tax– This tax was paid by the retailer, who would then shifts the tax burden to customers by charging sales tax on goods and service.

  • Value Added Tax (VAT)– It was collected on the value of goods or services that were added at each stage of their manufacture or distribution and then finally passed on to the customer.

Central Board of Indirect Taxes and Customs (erstwhile Central Board of Excise & Customs) is a part of the Department of Revenue under the Ministry of Finance, Government of India. It deals with the tasks of formulation of policy concerning levy and collection of Customs, Central Excise duties, Central Goods & Services Tax and IGST, prevention of smuggling and administration of matters relating to Customs, Central Excise, Central Goods & Services Tax, IGST and Narcotics to the extent under CBIC's purview. The Board is the administrative authority for its subordinate organizations, including Custom Houses, Central Excise and Central GST Commissionerates and the Central Revenues Control Laboratory. 

Indirect Tax in India

GST- Goods and Services Tax

With the implementation of GST, we have already witnessed a number 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.