By contrast, 'indirect taxes', such as the U.K.'s value added tax (V.A.T.), are those that the taxpayer pays to the government indirectly; i.e., the person who bears the tax (the customer) pays it to the retailer, who in turn passes it on to the government."
“An indirect tax is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). An indirect tax is one that can be shifted by the taxpayer to someone else. An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products.”402
400 Id. 13.
401 Income Tax Department, Department of Revenue, Ministry of Finance, Government of India. Amended by Finance Tax 2018.
402 “DIRECT AND INDIRECT TAXES,” Statistical Yearbook of India (2017). The Government of India, Ministry of Statistics and Programme Implementations.
"Indirect taxes are generally regarded as an inequitable way of raising revenue and as inferior to direct taxes i.e. Income tax. Moreover, indirect taxes generally are regarded as regressive.
They fall capriciously on an individual with the same taxing capacity."403
4.2.2.1. Consumption Tax
In general, the tax that is imposed broadly and equitably on consumption is known as Consumption Tax. On balance, in Japan, all goods and commodities provisions and sales are contingent on consumption tax. “While the tax is imposed on sales of business entities as a taxable person, they may deduct tax on purchases from that on sales and pay the remainder to prevent tax accumulation.”404
In other words, the consumption tax can be referred to as "[t]he form of taxation that is paid on the individual or household consumption of goods (and sometimes on services as well).
Consumption taxes are often levied in the form of sales taxes, taxes that are paid by consumers to vendors at the point of sale. These taxes can be applied either to a wide variety of consumer goods or to a particular good alone."405 When the tax is implemented to only certain goods, like gasoline or cigarettes, the sales tax is called an ”excise”406 tax. Consumption taxes are of indirect taxes since they are applied indirectly to individuals through levying taxes on their transactions.
4.2.2.2. Customs Duty
403
404 Learn about “Consumption Tax”, International comparison of value added tax rates (standard rates and rates on food) 2017.
405 Jonathan Gruber, “Public Finance and Public Policy.” Part IV-Taxation in Theory and Practice, 3rd edition, (2008).
406 A tax levied on certain goods and commodities produced or sold within a country and on licenses granted for certain activities.
“Customs Duty is a tariff or tax imposed on goods when transported across international borders. It is done by controlling the flow of goods (especially the restrictive and prohibited goods) transactions, in and out of the country, only to protect the economy and jobs of countries. Therefore, it can be simply inferred that it is the tax imposed on imports and exports of goods.”407
4.2.2.3. Excise Duty
It is the tax that is levied on excisable goods (goods that are subject to an excise tax) that are manufactured for consumption. It is compulsory to pay Excise Duty on the goods manufactured unless they are exempted.
It also “includes any duty other than general consumption tax imposed under the General Consumption Tax Act and an export duty of customs imposed on any articles manufactured in the country.”408
It could also be implied as "a type of tax charged on goods produced within the country (as opposed to customs duties, charged on goods from outside the country). It is a tax on the production or sale of a good. This tax is now known as the Central Value Added Tax (CENVAT). It is mandatory to pay duty on all goods manufactured unless exempted."409
4.2.2.4. Service Tax
"Service Tax was imposed in 1994 for the first time on telephone services, services relating to non-life insurance and services provided by Stock Brokers410 It fact, the Tax "levied on the gross amount charged by the provider on the receiver" is known as the service tax.
407 Id. 13.
408 Id.
409The Excise Duty Act, February 6 1942.
410. "SERVICE TAX ACT," Chapter V of the Finance Act, 1994. "
4.2.2.5. Sales Tax
"A sales tax is charged at the time of purchase for specific goods and services. In the United States, many State and Local governments have passed laws to tax retail sales. The amount of this tax varies and is usually based on a percentage of the sale amount known as the sales tax rate."411
4.2.2.6. Value Added Tax (V.A.T.)
"It is a tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately which is passed on to the consumer. It is a multi-point levy on each of the entities in the supply chain.”412
In other words, "the V.A.T. is a tax on turnover, applied to industrial, commercial and craft activities, professionals, construction work, real-estate operations and importations."413
4.2.2.7. Securities Transaction Tax (S.T.T.)
"S.T.T. is a tax levied on all transactions done on the stock exchanges. S.T.T. is applicable on purchase or sale of equity shares, derivatives and equity oriented mutual funds. A person becomes investor after payment of S.T.T. at the time of selling securities (shares)."414