Types of Taxes | Goods and Services Tax (GST) - B Com PDF Download

Direct Taxes at Central Level

• Income tax 
• Corporation tax 
• Divident tax 
• Capital gain tax 
• Wealth tax 
• Gift tax 
• Estate duty

Direct Taxes at State Level

• Land revenue tax 
• Agricultural income tax 
• Professional tax

Direct Taxes at Local Level

• House property tax

^{Indirect Taxes Levied by Central Government}

• Central exercise duty 
• Customs duty 
• Central sales tax 
• Service tax

Levied by State Government

• State sales tax 
• Value added tax 
• Entertainment tax 
• State exercise duty 
• Other indirect taxes

Levied by Local Government

• Octroi

Features of Direct Taxes

• Single Destination for all Direct Tax laws: It can be said that all direct tax law which are in force gets replaced by the direct tax code. DTC will emerge as a single window solution for all taxpayers. It will eventually paves the way for unified direct tax reporting system.
• Digitalization in legal prosecution: Introduction of the assessment unit for tax proceedings to deal with individual & corporate taxpayers, will turns to be a big step by that one may get rid from the harassment faced by taxmen. All communication between taxpayers and taxmen will be in digital form. Moreover, all digital communication shall bears a unique document identification number.
• Easy to Amend: The New direct tax code has been designed in such a manner where the statue have been reflected by the essential and general principles, upto the extent possible and the detail matter are contained in the rules/schedules.
• No dividend distribution Tax: The new tax law brings another good concept that might help companies to get relieves from paying Dividend Distribution Tax which is (15% +12% surcharge+3% cess) therefore Effective is 20.35% as well. There is a possibility that dividend shall be taxed only in the hands of shareholders. It may encourage the companies to declare higher rate of dividend in contrast with early trends.
• Simplified language: The expansion of Indian economy boosts the number of taxpayers in last six decade. But the amount of tax collections was increased moderately in the meantime which forces the department think over the cost of compliance incurred by them. In order to curtails the cost, one must facilitate to design such architecture where taxpayers are facilitating to voluntary compliance the law. This is sought to be achieved by keeping the law in simple language with clarity of intent. The new DTC are very simple with less than 400 section and also replace the  number of odd sections in current IT Act 1961.
• Stable Tax rates: In Current scenoario, there is a lot of uncertainty regarding tax rates of relevant year which are stipulated to finance act of that year due to which taxpayers face difficulties in tax planning for each year. But this issue also get resolve in DTC under which all tax rates are proposed to be prescribed in schedules which obviating the needs of the finance act of every relevant year. Further, any changes is proposed in rate schedules of new tax law shall firstly brought before the parliament in form of amendment bill for approval to commence such changes.

Merits of Direct Taxes

• Equitable: The burden of direct taxes cannot be shifted. Hence equality of sacrifice can be attained through progression. Of course, the very low incomes can be exempted. This cannot be achieved- by taxes on commodities which fall with equal force on the rich and the poor. The tax raises the price of the commodity, and the price of a commodity is the same for every person, rich or poor.
• Economical: The cost of collection of direct taxes is low. They are mostly collected “at the source”. For instance,-the income tax is deducted from an officer’s pay every month. This saves expense. The employer acts as an honorary tax collector. This means great economy. 
• Certain: In the case of a direct tax, the payers know how much is due from them and when. The authorities also know the amount of revenue they can expect. There is certainty on both sides. This minimises corruption on the part of collecting officials.
• Elastic: If the State suddenly stands in need of more funds in an emergency, direct taxes can well serve the purpose. The yield from income tax or death duties can be easily increased by raising their rate. People cannot stop dying for fear of paying death duties.
• Productive: Another virtue of direct taxes is that they are very productive. As a community grows in numbers and prosperity, the return from direct taxes expands automatically. The direct taxes yield a large revenue to the State.
• A means of developing civic sense. In the case of a direct tax, a person knows that he is paying a tax, he feels conscious of his rights. He claims the right to know how the Government uses his money and approves or criticizes it. Civic sense is thus developed. He behaves as a responsible citizen.

Demerits of Direct Taxes

• Inconvenient: The great disadvantage of a direct tax is that it pinches the payer. He ‘squeaks’ when a lump sum is taken out of his pocket. The direct- taxes are thus very inconvenient to pay. Nobody can help feeling the pinch.
• Evadable: The assessee can submit a false return of income and thus evade the tax. That is why a direct-tax is “a tax on honesty.” There is a lot of evasion. Many of those who should be paying taxes go scot-free by concealing their incomes.
• Arbitrary: If taxes are progressive, the late of progression has to be fixed arbitrarily; and if proportional, they fall more heavily on the poor. Thus, both are bad. The rate of taxes depends upon the whim of the Finance Minister. This is arbitrary. 
• Disincentive: If the taxes are too heavy, they discourage saving-sand investment. In that case the country will suffer economically. A high level of taxation discourages investment and enterprise in the country. It inflicts a lot of damage, on business and industry.

Features of Indirect Taxes

• Payment and Tax Load: The service provider makes payment of indirect taxes and this is transferred to a final consumer.
• Liability of Tax: Here the seller or service provider makes payment on indirect taxes which are transferred to final consumer.
• Nature: Initially, indirect taxes used to have a regressive nature. Yet, now with the coming of GST, they have become quite progressive.
• Evasion: Indirect taxes are hard to evade due to direct implementation through goods and services.
• Investment and Saving: Most indirect taxes are largely growth-oriented since they de-motivate the consumer and encourage savings.
• Social Coverage: The indirect tax has a much larger coverage since their charge falls upon each individual buying products or services.

Merits of Indirect Taxes

• Everyone can contribute Unlike Income Tax, which has to be paid by individuals in certain income brackets and not others, Indirect Taxes have to be paid by each and everyone who purchases the commodity. Persons not  working in India like tourists and persons of lower economic strata also have to pay it because they will in some form purchase commodities.
• They are convenient Indirect taxes are very convenient as far as charging them is concerned. Firstly, the taxes can be very nominal and consumers do not feel burdened when paying such small amounts. Secondly, these indirect taxes are said to be ‘hidden in the price’, which means that the consumer only effectively sees the price of the commodity itself.
• They cannot be evaded Indirect taxes cannot be evaded, because they are part of the price of the commodity. So anyone who buys the commodity, will pay the tax.
• They are spread over a wide range Heavy taxation in any one aspect of a service or commodity will be highly noticeable as well as a burden on the consumer. In this regard, indirect taxes can be beneficial since they are spread out over a wide range of products in smaller amounts.

Demerit of Indirect

• Indirect Tax can be regressive: Since indirect tax is the same for both the rich and the poor, it can be deemed unfair to the poor. Indirect tax is applicable to anyone who makes a purchase, and while the rich can afford to pay the tax, the poor will be burdened by the same amount of tax. Thus, indirect taxes may be seen as regressive.
• They raise price of commodities: Sellers cannot always calculate and collect the exact fraction of tax applicable on all commodities that they sell. And hence they consciously charge more than the tax amount so they can be sure that every buyer paid the indirect tax. But this has a cumulative effect and increases the price of commodities.
• No civic consciousness: Indirect taxes do not raise civic awareness because millions are not even aware that they’re paying a tax because it is hidden in the price.