Indirect Tax Definition, Types, Features, & Advantages Fi Money

State has to spend large amounts of money on collection of taxes. State can increase its revenue within limits by increasing rates of taxes. An importer must pay a customs charge when a container from another nation enters the US. Central Goods and Services Tax replaces almost all the pre-existing taxes that were under the Central Government previously.

It pinches him that his hard-earned money is being taken by government. So he often submits false statements of his income and thus tries to evade tax. There are two main types of taxes (1) direct tax and (2) indirect tax.

Indirect Tax – Definition, Types, Features, & Advantages

Using the INDIRECT function, you can not only create indirect references to other cells from the same sheet but to other sheets too. Whenever you delete, add, or move cells in Excel, it automatically updates the cell references in formulas. From the backstage view, the INDIRECT function turned the text string in Cell B2 (A2) into a cell range and created an indirect reference to it.

Example 2: Use Cell Reference in a Cell to Fetch the Value

Unless you define the format of the cell reference in the 2nd argument, the default format will be A1 style. The final step is filing the necessary tax forms and remitting the collected funds to the appropriate government agency. This is done on a periodic basis, which can be monthly, quarterly, or annually, depending on the jurisdiction and the amount of tax collected.

The excise duty on the manufacture of cigarettes is a typical example of an indirect tax. The government collects indirect taxes to generate revenue for the country’s development. The money collected is used to construct roads, bridges, highways, hospitals, and other socio-economic welfare projects in the country. Cigarettes, alcohol, and fuel excise taxes are all instances of indirect taxes.

• Instead, it is collected by an intermediary, such as a retailer, and passed on to the government.
• Further, under the GST regime goods and services are treated equally for the purpose of imposition of taxes.
• Indirect taxes are taxes payable by the manufacturer that are passed on to the customer.

Customs duty

People are already on the verge of paying indirect taxes whenever they purchase at malls or department stores. Such taxes apply to products such as clothing, home goods, and other essentials. The sales tax that the shop collects and disburses to the government is added to the total sale price after payment at the counter. Finally, indirect taxes can also be used to influence consumer behavior. For example, governments may impose higher taxes on certain goods or services in order to discourage their consumption.

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Based on the need, the government can raise or cut the tax rates. Customs duty is something that GST cannot replace since it involves international trading. If you have goods that have to be traded with another country, then this tax will be applied to them. In the same way, we have to pay taxes for products that come to our country from somewhere else. But there are still some products on which excise duty is applicable. Petroleum and its byproducts, fuel, and liquor all have excise duty.

• In the standard Windows configuration for North America and some other countries, the default List Separator is a comma.
• There are three kinds of direct references that you can create in Excel – learn about them all here.
• One use case is explained in this formula, which sums the bottom n values in a range.
• The tax is collected by an entity such as a retailer but is ultimately passed on to the consumer, who carries the cost of the tax by paying the price of the product or service.
• Ultimately, the end consumer of the goods/services pays the tax.

Indirect taxes typically apply to everyone who buys goods or services, making the tax base broad. This widespread application ensures that even individuals not subject to income tax contribute to government revenues. Indirect taxes are taxes payable by the manufacturer that are passed on to the customer.

Apart from SUM, INDIRECT is frequently used with other Excel functions such as ROW, COLUMN, ADDRESS, VLOOKUP, SUMIF, to name a few. To get into the function’s insight, let’s write a simple formula that demonstrates how you use INDIRECT in Excel. Well then, what is the INDIRECT function in Excel and what do I use it for?

Examples include value-added tax (VAT), excise duty, customs duty, and Goods and Services Tax (GST). This type of tax is embedded into the final price of products, which means consumers may not always be fully aware of how much they are contributing. An indirect tax is a levy on goods and services collected by an intermediary, such as a retailer, rather than directly by the government.

As the formula is copied down, it returns the value in cell A1 for each of the 5 sheets listed in column B. For Instance, income tax is a direct tax because impact and incidence falls on the same person. In this post, we will talk about the difference between direct tax and indirect tax. The main reason for imposing taxes is that they are the main source of government revenue. Revenue collected by the government is used for the purpose of providing public utility services like defense, education, infrastructure facilities, health care, etc.

For instance, we have a list of cricket players from each country in an excel spreadsheet. The INDIRECT function in Excel can be used to create a drop-down indirect tax definition list. The dependent drop-down list is nothing but a list of one cell depending on the value entered in the other cell.