Journal Press India^®

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An indirect tax is one whose burden can be shifted from the original payer to the ultimate consumer of the commodity or service taxed. Indirect taxes (also called hidden taxes) are convenient to collect but lack equity attribute. They do not allow considerations for the personal circumstances of taxpayers as do direct taxes. The distribution of indirect tax burden is often, though not always, regressive and even the poorest of the poor are made to contribute to public exchequer. This paper examines the indirect tax structure of India prior to the introduction of Goods and Service Tax (GST) to enable an understanding and appreciation of the need for GST in India. It analyses the various indirect taxes such as import duties, excise levies, and sales taxes. It also shows how VAT, which is a multi-stage tax levied on all stages of production and distribution of a commodity, suffers from certain limitations. Despite the self-policing nature of VAT, opportunities do exist under it for evasion and fraud. The need to overcome various challenges and limitations of this indirect tax structure has led to the adoption of a unified tax regime, i.e. GST.

Keywords

Indirect taxes; Excise duty; Customs duty; Value added tax (VAT); Goods and Services tax (GST); Tax equity

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