Types of Indirect Taxes in India
The following are some of the most widely applicable Indirect Taxes in India
1. SERVICE TAX IN INDIA
Service Tax is a tax which is levied on the Services provided by an entity. If an entity is providing any service, they are required to levy Service Tax on the same. This service tax is collected from the recipient of service and deposited with the Central Govt.
To read more about Service Tax, you may refer this article on What is Service Tax and Current Rate of Service Tax in India.
Service Tax is levied on all services except the Services specified in the Negative List of Services. Apart from this, Service Tax Exemption is allowed to Small Scale Service Providers if the Total Value of Services provided by them during the year is less than Rs. 10 Lakhs.
2. EXCISE DUTY IN INDIA
Excise Duty is an indirect tax levied on those goods which are manufactured in India. The taxable event in this case is manufacture and the liability of central excise duty arises as soon as the goods are manufactured. It is a tax on manufacturing which is paid by the manufacturer, who passes its incidence on to other customers and recovers the same from them.
The rules and provisions as mentioned in the Central Excise Act, 1944 are applicable for the levy of excise duty in India. This tax is also levied by the Central Govt.
3. VAT IN INDIA
VAT stands for Value Added Tax and is levied on the sale of movable goods in India. VAT is a multi-point destination based system of taxation, with tax being levied on value addition at each stage of transaction in the production/ distribution chain. The term ‘value addition’ implies the increase in value of goods and services at each stage of production or transfer of goods. VAT is a tax on the final consumption of goods or services and is ultimately borne by the consumer
VAT is basically a state subject, derived from Entry 54 of the State List, for which the States are sovereign in taking decisions. The State Governments, through Taxation Departments, are carrying out the responsibility of levying and collecting VAT in the respective States
4. CUSTOMS DUTY IN INDIA
Customs Duty is a type of Indirect Tax which is levied on goods which are imported into India. In some cases, it is also levied when the goods are exported from India.
In India, the basic law for levy and collection of customs duty is Customs Act, 1962 . It provides for levy and collection of duty on imports and exports, import/export procedures, prohibitions on importation and exportation of goods, penalties, offences, etc.
5. SECURITIES TRANSACTION TAX (STT)
Securities Transaction Tax or STT is a type of Indirect Tax which is levied at the time of sale/purchase of securities through the Indian Stock Exchanges. These securities include Shares, Mutual Funds, F&O Transactions etc. Securities Transaction Tax was introduced in India by the 2004 Budget and is applicable with effect from 1st April 2004.
The reason for the introduction of Securities Transaction Tax was to lower the tax on short term capital gains and to make the long term capital gains exempted from the levy of any tax.
6. STAMP DUTY
Stamp Duty is an indirect tax levied by the State Govt’s on the transfer of immovable property located in their state. It is also levied by the Govt on all Legal Documents. The Stamp Duty Rates vary from State to State.
7. ENTERTAINMENT TAX
In India, Entertainment Tax is levied on every financial transaction that is related to entertainment and is reserved primarily for the state governments. Some forms of entertainment on which entertainment tax is levied include Amusement Parks, Video Games, Arcades, Exhibitions, Celebrity Stage Shows, Sports Activities etc.
Apart from the above mentioned Indirect Taxes, there are several other Indirect Taxes in India as well like Luxury Tax, Sales Tax, Octroi etc.
Types of Indirect Taxes in India
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