The taxes imposed by the Central government are of two types:
(a) Direct Taxes: When the tax is paid by an individual on whom it is levied, it is called a direct tax. The burden of this tax is not transferable to others. The important direct taxes are personal income tax. the corporate tax, wealth tax, stamp duty, etc.
(b) Indirect Taxes: If the burden of tax imposed by the government is transferable to others, it is called Indirect Tax. Generally, indirect taxes are imposed on goods and services. For example, the government imposes a tax on the manufacturer of goods and services at the time of producing such goods and services. The manufacturer transfers this burden to the trader. The trader transfers this burden to the consumer.
This means that if the government imposes a tax on the producer, the tax is ultimately paid by the consumer. The main forms of indirect taxes are central excise duty, value-added tax (VAT), import-export taxes and service tax etc. However, with effect from 1st July 2017, a single good and service tax (GST) has been introduced.
