Union Budget: Revenue from taxes and other sources is the main source of revenue for the government. The government imposes two types of taxes on its citizens which include direct and indirect taxes.
Income tax, real estate tax, personal property tax and tax on properties are all examples of direct taxes. While GST, Customs Duty and Tax Deducted at Source (TDS) are examples of indirect tax methods.
Non-tax revenue, on the other hand, is the fixed income that the government receives from sources other than taxes. Interest, dividends and profits from public sector businesses make up the majority of this category of earnings.
direct tax
The Income Tax Board obliges individuals or legal entities to pay taxes according to their income. Hence, when an individual or an entity pays tax directly to that entity, it is called a direct tax. Direct tax cannot be paid on behalf of anyone, ie. The liability to pay tax cannot be shifted to someone else. For example, income tax, real estate tax, corporate income tax, inheritance tax and gift tax.
indirect tax
Taxes paid for goods and services are called indirect taxes. In indirect taxes, the liability to pay the tax and the person who ultimately pays it to the government are separate. Indirect taxes are for example Goods and Services Tax (GST), Value Added Tax (VAT), Sales Tax etc.
In 2016-17, personal income tax and corporate tax accounted for 51.3% of total revenue, while indirect taxes accounted for the rest. This percentage was 56.4% in 2020-21, with corporate tax at 28.1% and personal income tax at 28.3%.
After the new indirect tax regime came into force in 2017, GST subsumed more than a dozen state levies and completely abolished indirect taxes (with the exception of customs duty). It was the primary source of indirect tax collection for the Centre. Now the tax rates are not decided by the government, but by the GST Council.