Question

GST is a direct or indirect tax?

Answer 1

Answer: Indirect Tax

Explanation:

GST (Goods and Services Tax) is classified as an indirect tax because it follows the fundamental principle of indirect taxation - the tax burden can be shifted from one person to another. When you buy something from a shop, the shopkeeper collects GST from you and then passes it on to the government.

To understand this better, let's look at the key differences between direct and indirect taxes:

• Direct taxes are paid directly by individuals or organizations to the government (like income tax, property tax) • Indirect taxes are collected by intermediaries and then passed to the government (like GST, excise duty, customs duty)

In the case of GST, when a manufacturer sells goods to a wholesaler, they charge GST. The wholesaler then sells to a retailer and adds GST to their selling price. Finally, when you purchase the product, the retailer collects GST from you. At each stage, the tax burden is transferred to the next person in the chain, with the final consumer ultimately bearing the cost.

GST replaced multiple indirect taxes that existed earlier in India, including VAT, service tax, excise duty, and several others. This consolidated approach simplified the taxation system while maintaining its indirect nature. The tax is ultimately reflected in the price of goods and services that consumers pay, making it a consumption-based indirect tax.