Question

Explain the terms direct tax and indirect tax with an example.

Answer 1

a. Direct Tax:
A direct tax is paid directly by an individual or organization to an imposing entity. A taxpayer, for example, pays direct taxes to the government for different purposes, including real property tax, personal property tax, income tax, or taxes on assets.

b. Indirect Tax:
If tax is levied on the goods or services of a person(seller), it is known as indirect tax. It is, collected from the buyers and is paid by the seller to the government. It is paid to the government by one entity in the supply chain. Example: GST.