TAX REVENUE
Tax refers to general compulsory contribution of the wealth if a person. It is levied upon natural and corporate person. The main reason behind tax collection is to meet the expense which is incurred in conferring common benefits to the public. The residents of the state are the ones who pay the tax. There is no direct quid pro quo concept in tax. It does not give direct benefit to the one who pays tax.
On the basis of imposition of burden, the tax revenues are classified into direct and indirect taxes:
DIRECT TAX:
The tax which is paid directly by the person on whom it is imposed is a direct Tax. In this case the burden does not shift to the other, i.e the person bearing the tax and the person paying the tax are the same. There is a direct connection between the tax payer and the tax levying authorities.
Direct Tax includes: Income Tax, Wealth Tax, Corporate tax, Gift Tax, Estate Duty. Etc.
INDIRECT TAX (also known as COMMODITY TAX):
The tax which is not paid directly by the person on whom it is imposed is an indirect Tax. In this case the burden partly or wholly shifts to the other, i.e the person bearing the tax and the person paying the tax are not the same. There is no direct connection between the tax payer and the tax levying authorities.
Indirect Tax includes: Customs Duty, Excise Duty, Sales Tax, Service Tax, VAT, GST, etc.
| DIRECT TAX | INDIRECT TAX | |
| In this type of tax revenue, the person paying the tax is the on whom the tax is levied, i.e., burden of tax falls on the same person/assessee. | In this type of tax revenue, the person paying the tax is not the on whom the tax is levied, i.e., burden of tax falls on two different person. | |
| They are levied on the Assessee and also collected from him | They are levied and collected from the consumer but are paid by the Assessee | |
| These are compulsorily collected from the Income/Wealth of the Assessee | They are collected on the services rendered/Purchase or Sale of Goods | |
| Tax is collected in the Assessment Year for the income earned in the Previous Year, i.e, the tax is collected after the income for the whole year has been earned, or on the valuation date after the value of the asset is determined. | Tax is collected at the time the service is rendered or the good is purchased or sold. | |
| There is a direct connection between the tax payer and the tax levying authorities | There is no direct connection between the tax payer and the tax levying authorities | |
| In this case, Central Board of Direct taxation (CBDT) is the administrating authority. | In this case, Central board of Indirect Tax and Customs (CBIC) is the administrating authority. | |
| The burden of tax cannot be shifted | The burden of Tax is shifted to the ultimate user | |
| It is progressive in nature, i.e, with the increase in income, the burden of tax increases | It is regressive in nature i.e, with the increase in income, the burden of tax decreases. | |
| It satisfies Cannons of Certainty | It satisfies Canons of Convenience | |
| The tax evasion in this case is more as the sector is unorganised | The tax evasion in this case is less as the sector is more organised. |
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