Tax is a share in the income of any economic transaction imposed by the government. There are two types of taxes:Direct and Indirect taxes. Direct tax is paid directly the person who gains profit and indirect tax is paid by someone else(Usually the person who buys the goods or uses the service).
Common Direct taxes Imposed in India
Income tax: Income tax in India is progressive tax which means tax percentage increases progressively as income increases.Recently, Government increased income tax exemption from 2 lakhs to 2.5 lakhs. Revised income tax rates for individual are as follows (Source:Income tax Department India)
Corporation tax: It is paid by companies based on India and companies doing economic transaction. They pay tax as a percentage of their profit.
Property tax: It is imposed by state government on building owners and it is collected by Local government authorities.
Common Indirect taxes Imposed in India
Customs duty is imposed on imported and exported goods
Excise duty is imposed on the production and sell of certain goods such as tobacco , Alcohol and other fuels.
Service tax is imposed on almost all the services in the country. Service tax is fixed at 12.36%. Only few services are exempted from paying Service tax and these services are in negative list. All the other services are taxable.
Value Added Tax(VAT): VAT is imposed by the state government based on value addition of the product. VAT is calculated based on the difference between the selling price and cost price.
Securities Transaction Tax(STT): STT is imposed on every transaction of stock exchange and on buying and selling of government security.
Sales tax: Sales tax is paid by the person who buys new goods. It is usually collected along with VAT. It is imposed by both the central(central sales tax) government and state (state sales tax) government.
Goods and Service Tax(GST): GST is a proposed tax system aimed to integrate customs duty, excise duty,service tax and value added tax and thus makes tax simple system. So if implemented ,GST will replace all existing indirect taxes levied on goods and services. Hence it will uniformity in tax structure and prevents double taxation.