TYPES OF TAXES

 

TYPES OF TAXES

INTRODUCTION:

           In a Welfare State, the Government takes primary responsibility for the welfare of its citizens, as in matters of health care, education, employment, infrastructure, social security and other development needs. The taxation is the primary source of revenue to the Government for incurring such Public welfare expenditure. Thus, taxes are compulsory or enforced contribution to the Government revenue by public. Government may levy taxes on income, business profits or wealth or add it to the Cost of some goods, services, and transactions.

 There are two types of taxes:

•  Direct Tax
• Indirect Tax

DIRECT TAX	INDIRECT TAX
Tax Incidence and impact fall on the same person.	Tax Incidence and impact fall on two different persons.
Assessee, himself bears such taxes. Thus, it pinches the taxpayer.	Tax is recovered from the assessee, who passes such burden to another person. Thus, it does not pinch the taxpayer.
Levied on income	Levied on goods and services. Thus, this type of tax leads to inflation and have wider base.
Progressive in nature i.e., higher tax are levied on person earning higher income and vice versa.	Regressive in nature i.e., all persons will bear equal worth of tax on goods or service consumed by them irrespective of their ability.
Income based tax	Destination based tax
Example : Income Tax	Example: GST (GOODS AND SERVICE TAX)