INTRODUCTION
There has been a lot of confusion between income tax & GST since the Indian government introduced a new tax system. It is vital to understand the significant differences between complementary ITR & GST. Taxes are basically divided into two main categories, namely, direct taxes, & indirect taxes. Direct taxes are added to your income, while indirect taxes are levied on buyers & consumers. GST falls under the indirect tax, while the income tax is the direct tax. We will further discuss this in detail to better understand taxes, ITR filing, & GST filing.
INDIRECT & DIRECT TAXES
The Taxes are levied on the citizens and state-owned enterprises by the government each year. The citizens are required to pay the taxes every year to eh government.
Tax collection is supported by the laws of the land and is supported by various organizations. Each country has a different system for charging its citizens.
The main reason for taxing the people is to make enough money to improve the state of the country.
Direct taxes are payable by the taxpayer and are non-transferable. They are paid directly by the people to the government of the Nation and are only paid after the taxpayer has received the income.
On the other hand, indirect taxes are passed, and responsibility may be imposed on others.
Indirect taxes paid by one person are reimbursed by another person.
Ultimately it is the consumer who carries indirect taxes.
Consumers pay the taxes before the government even reaches out to the taxpayers. Individual tax collection is comparatively much easier than direct tax collection.
GST (Value Added Tax) and VAT (Value Added Tax) are indirect taxes, while income tax is a direct tax.
A. Certain examples of the Direct Taxes are as follows:
1. Income Tax:
Given by the individuals that fall under a specific tax bracket and pay directly to the government.
2. Corporate Tax:
Given by the companies & corporations to the government.
3. Estate Duty:
Levied on the individuals in case they have inherited something.
4. Fringe Benefits Tax:
Given by the employer that gives fringe benefits to their employees.
5. Wealth Tax:
Levied on the individuals who own properties.
6. Gift Tax:
Given to the government by those people who have received taxable gifts.
B. Certain examples of the indirect taxes are as follows:
1. GST:
The Goods & services taxes are levied on the goods purchased and services provided.
2. Sales tax:
Service tax is paid by the shopkeepers but ultimately gets shifted to the consumers via levying charges on the goods.
3. Excise duty:
Given by the manufacturers of the goods but eventually gets shifted to the wholesalers & retailers.
4. Entertainment tax:
Given by the cinema premises owners but gets shifted to the consumers of the media.
5. Custom duty:
Tax is levied on the goods imported from other nations and paid by the consumers.
6. Service tax:
Paid by the individuals that avail certain services for instance food bills in the restaurants.
7. GST
GST was introduced in India by the Indian government in order to eliminate all the cascading & complicated tax systems in place before, which made it difficult for collecting taxes. The GST is levied on the goods & services. Due to the introduction of the GST, service tax, value-added tax, excise duty, etc., were made obsolete. It is a sort of indirect tax imposed on the supply chain of certain goods & services.
8. Income Tax
Income tax is exclusively paid by the citizens who earn more than 2.5 lacs per year. The IT Department predetermines the tax slabs & the tax they are required to pay. The highest amount of income tax a citizen can pay is around 30% of their salary. It is compulsory to pay the income tax, and the responsibility shall not be shifted to anybody else.
DIFFERENCES BETWEEN THE ITR FILINGS AND GST FILINGS
INCOME TAXES | GOODS & SERVICES TAXES |
Income tax is levied on the individuals and the income they made in a year. | As the name makes it clear, the GST is the tax imposed on goods & services. |
Citizens are only required to pay income tax if their annual income is more than 2.5 lakhs. | People need to register for and pay the GST if their annual turnover reaches more than 40 lakhs. |
It’s a sort of direct tax collected by the government from the people. | It is a sort of indirect tax collected by the government from the people. |
The individual itself has to pay the income tax. If they earn more than 2.5 lakhs per year, they have to pay the income tax to the government directly as they cannot rely on or shift the duty to somebody else. | The GST is ultimately paid by the people who are the consumer even if they are not paying the government directly. The tax is shifted onto the consumer eventually. |
The government extracts the income tax on the people’s annual salary, income from capital gain, house property, etc. | The government imposes the GST on buying goods and availing of services provided only. |
Only the taxpayers themselves are liable for paying the income tax to the government. | The GST is paid by all the citizens of the country as it has a wide coverage. |
One cannot transfer it to anybody else. | One can transfer the GST to someone else. |
It is a type of Direct Tax with only one stage. The income tax is directly proportional to the amount of money an individual earns in a year. The higher their annual salary, the more income tax they have to pay. | It’s a sort of multistage and comprehensive destination-based tax since it has replaced various indirect taxes, for instance, additional customs duty, value-added duty, service duty, Central excise duty, etc. |
CONCLUSION
The government has implemented a number of laws that require its citizens to pay taxes in a fair and timely manner. The main difference between income tax & GST is that tax is a direct tax whereas GST is a direct tax. Both of these types of taxes are important to the government in order to improve the country's infrastructure and other objectives. Income tax is payable only if you are in a certain bracket, while everyone pays GST for purchasing goods and using services.
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