Financial Terminology Series - 6

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Term Of the Day

Indirect Tax


A tax which is collected by an intermediary from its customers and later on pass on to the government. The intermediary ultimately become a collection agency to collect such taxes levies on Goods and Services. 

Earlier in India, it was known as sales tax, Value added tax (VAT) but now replaced with GST – Goods and Service Tax. This is to bears by the consumers as the ultimate economic burden.

Duties on import or taxes on fuel, liquor, and the cigarette, airline services, food services etc. are all the examples of indirect taxes.

Taxes levied by the government at the Manufacturing or production level are considered as indirect taxes. Carbon emission fees imposed by the government in some countries are also an example of indirect tax.

These all are the example of indirect taxes and ultimately passed along to consumers.

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