What are the differences between direct tax and indirect tax?
The major differences between direct tax and indirect tax are as follows −
|Direct Tax||Indirect Tax|
It is the tax on income/profits.
Individuals, firms, companies pay direct taxes.
It is applicable to taxpayer.
It is burden on individual.
It can’t be transferred to others.
It covers an entity/individual.
It has high administrative cost.
Tax evasion is possible.
It includes good allocative effects (less burden).
It may reduce inflation.
It results in lesser savings, investments demoralising.
The mode of progress is progressive.
It is difficult to collect taxes.
It includes income tax, wealth tax and corporate tax.
It is the tax on goods and services.
End consumer of service/goods are taxpayers.
It is applicable at each stage of production/distribution chain.
It is burden on consumer.
It can be transferred to others.
It has wide coverage.
It has less administrative cost.
Tax evasion is not possible.
It may cause increase in inflation.
It is growth oriented.
The mode of progress is regressive.
It is easy to collect taxes.
It includes GST and service Tax.
Published on 25-Jul-2020 10:54:37