Direct Taxes: Taxes which are directly levied on Income of the person and its burden can not be shifted; for example Income Tax.
Indirect Taxes: Indirect taxes are imposed on price of goods or services. Person paying the indirect tax can shift the incidence to another person; for example GST or Customs Duty.
Impact and Incidence of Tax– The impact of tax is on the person who pays it in the first instance and the Incidence of Tax is on the one who finally bears it. Therefore the incidence is on the final consumer.
The above table gives the distinction between direct and indirect taxation.
Constitutional Provision for levy of Tax
The constitution of India provides the following provisions for levying taxes on its subjects-
Article 265– No tax shall be levied or collected except by the Authority of Law.
Article 246– Distributes legislative powers including taxation, between the Parliament of India and the State Legislature.
Schedule VII– Enumerates powers under three lists - Union List – Powers of Central Government , State List- Powers of State Government and Concurrent List- Both Central and state Government have powers, in case of conflict; law made by Union Government prevails.
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