Types of Indict Taxes

Types of Indict Taxes

Types of indirect tax include Specific tax, Ad valorem Tax and value added tax.

1.    Specific Tax

Under specific tax system tax is imposed on the bases of measurement or weight. For example excise duty on cement is imposed on per ton production of cement. Specific tax is easy to understand and impose.

2.    Ad Valorem Tax

Ad valorem tax is such tax which is imposed on the value of good, for example custom duty normally imposed on the value of goods. This tax system is bit difficult to implement because of difficulties in determining the value.

3.    Value Added Tax

Value added tax is imposed on value addition i.e. input tax is deducted from the output tax. it is important that input tax is imposed on purchase while output tax is imposed on sales. Therefore tax is paid only on net value addition.