Learn about the Key Indirect Tax Laws present in India

All the taxes that the Government of India collects from its taxpayers are generally categorized into 2 types of taxes. The first one is the Direct tax, whereas the other one is the indirect tax. To learn about India’s key indirect tax laws, make sure you read the whole article.

Indirect tax is the type of tax that is generally passed on to the other entity or individual. Indirect taxes are levied on either the manufacturer or the supplier, who will then pass that same tax to the consumer.

Some examples of indirect taxes are sales tax, excise duty, entertainment tax, etc. These taxes are levied on either the service providers or the goods sellers. That is then passed on to the final consumer in many forms like service tax, entertainment tax, excise duty, customs duty, etc. The most common example of this tax (indirect tax) is the tax imposed on alcohol. The tax that is imposed on alcohol is the excise tax.

What are the different types of indirect taxes in India?

  1. Service tax
    This particular tax is levied by different organizations for offering their services like legal, consulting, and other such services. Service tax is paid to the Government of India. Since 1st June 2016, the service tax was 14% along with Swachh Bharat Cess (0.5%) as well as Krishi Kalyan Cess (0.5%), which makes the whole applicable rate 15%.
  2. Excise duty
    Excise duty is applicable to all types of goods that are made and manufactured in India. It is an indirect tax that is often passed on to the customers but payable by the manufacturers. This tax is levied by the Indian Government and works as per the provisions mentioned in the Central Excise Act of 1944.
  3. VAT
    Value Added Tax or VAT is imposed on the purchase of movable goods in India. It is levied at all the stages of the production as well as the distribution channel that also include an instance of certain value additions.
  4. Customs duty
    Customs duty is one of the indirect taxes that are applicable if you bring imported goods into the country. In some instances, this tax may also be levied on some exported goods. The Customs Act of 1962 provides major regulations on the levy and the collection of the duty, export and import procedures, prohibitions, penalties, or offences.
  5. Securities Transaction Tax (STT)
    STT is imposed when stocks are bought or sold through any Indian stock exchange. This duty was introduced in 2004 and is applicable to mutual funds, shares, and future options transactions.
  6. Stamp duty
    Stamp duty is an indirect tax that is charged by state governments on all the transfers of immovable properties within their jurisdiction. Also, stamp duty is compulsory on all kinds of legal documents. The rates of stamp duty vary from state to state.
  7. Entertainment tax
    Entertainment tax keeps changing and is charged on every transaction that is made related to entertainment. Major examples of this tax are movie tickets, stage shows, video game arcades, exhibitions, sports-related activities, and amusement parks.
News Reporter