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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