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CS Executive · Tax Laws and Practice · Concept of Indirect Taxes at a Glance

Meera Traders, a GST-registered supplier, charges GST on its sales and deposits it with the Government. Which statement correctly describes the nature of this levy?

GST is an indirect tax. It is levied on supply, not on income, and the registered supplier collects it from the buyer and deposits it with the Government, so the economic burden is passed on to the final consumer.

  1. AIt is a direct tax because the trader pays it to the Government from its own pocket
  2. BIt is an indirect tax because the tax is collected by the supplier from the buyer and the economic burden moves to the consumerCorrect
  3. CIt is a direct tax because the trader is a registered person
  4. DIt is an income-based tax because it is computed on the trader's profit

Explanation

GST is levied on supply of goods or services, not on income or profit. The supplier acts as a collection point and recovers the tax through the price, so the burden is shifted forward. Registration does not change the nature of the tax.

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