As a modern Indian citizen, it is vital for you to be aware of the various costs and taxes being placed by the government in order to ensure compliance and make better decisions. Recently, the Finance Minister of India, Nirmala Sitharaman, has made several announcements regarding the taxation changes to be implemented in the 2023 Budget. As such, there have been proposals regarding both – direct and indirect tax. If you’re looking for an accurate source of information to learn more about these proposals or are curious about taxation changes in general, you’ve come to the right place. This blog will take you through the basics, highlights, and everything else you need to know about the indirect tax proposals in the 2023 union budget. Let’s begin:
What is Indirect Tax?
Before we dive into the highlights of the budget, it’s vital to fully understand the basics of indirect tax and how it works. An indirect tax is the kind of tax that’s levied on goods and services instead of the income and profits of the citizens. Some examples of indirect tax include Goods and Services Tax (GST), Excise Duty, Customs Duty, Sales Tax, and Value Added Tax. These taxes are paid to the government by the businesses which collect the cost of the taxes from the consumers. Being regressive taxes, the percentage of income that indirect taxes take from high-income earners is lower than the percentage they take from low-income earners. As such, indirect taxes aren’t very well favoured by certain sections of society.
What are the Different Types of Indirect Taxes?
Currently, there are four major kinds of indirect taxes in function throughout the country. These are:
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Goods and Service Tax
Goods and Service Tax is a value-added tax that was introduced to replace several other value-added taxes, including VAT, sales tax, and more. It is imposed on the sale of goods and services, and its value is based on the destination of the point of sale. The GST Council determines the ideal value of the tax each year.
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Central Excise Duty
Central excise duty is the tax charged on the production of various goods. It is usually levied on the production of domestic goods in an attempt to generate revenue for the government. The excise rates vary on various kinds of products across the market.
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Customs Duty
Customs duty is a tax charged by the government on the import of foreign goods and services. This tax is charged with the intent of making foreign goods more expensive and reducing competition for local businesses in India.
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Countervailing Duty
Countervailing duty is a tax that’s charged on imported goods that have been subsidized by foreign governments during export. This is meant to offset the subsidy, thereby making the product more expensive and serving a similar purpose as customs duty.
Highlights of the Indirect Taxes Proposal of the 2023 Union Budget
Now that we’re through with the basics let’s go over some of the highlights of the 2023 budget regarding proposals affecting indirect taxes:
- In an attempt to reduce customs duty and increase global cooperation, the number of basic custom duty rates has seen a significant drop (from 21 to 13) in industries other than textiles and agriculture.
- The basic custom duties on various items such as automobiles, toys, as well as bicycles have been modified.
- Excise duty of compressed biogas has been waived for the cases which are paid for using GST.
- The government has also introduced a complete exemption of customs duties for the import of specialized machinery to be used for the manufacture of lithium-ion powered batteries to be used in electrically powered vehicles.
- The customs duty on TV panel parts has also been reduced.
Final Thoughts
With the above brief highlights and a strong understanding of indirect taxes, you will be more informed and ready to make decisions. If you ever need help in taxation or legal advice, feel free to get in touch with our team at Lawgical India and experience the advantage of online legal services.
