Direct and indirect taxes are the two categories into which taxes fall. While indirect taxes are levied indirectly on consumers of goods and services, direct taxes are assessed directly on your income and wealth. An indirect tax is the GST.
In a nutshell, you owe income tax in your position as an individual and GST in your capacity as a consumer. Let’s learn more about income tax and the GST and what is the difference between GST and income tax.
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A Description of Taxes
A tax is an unavoidable charge that the government collects yearly from people or businesses. Every government enforces tax laws, including tax collection and payment. But different countries may have distinct tax and tax laws. Tax revenue is primarily used to fund the government’s many operations. The taxation system has been in place for a very long period.
When goods are sent to a country, import tax used to be levied. There were some nations that also taxed consumer goods. With time and the necessity for more funding, particularly during times of war, many governments began to impose taxes on numerous other things. They briefly assessed taxes on real estate-related assets.
Britain first enacted an income tax in 1799. Germany later introduced a turnover or purchase tax in its place.
Different forms of taxes exist today. The Goods and Services Tax (GST) and the Income Tax are the most visible taxes one must pay. Although the government benefits (GST Composition Scheme) from these taxes, the taxation policies differ significantly. Let’s find out more about the difference between income tax and GST.
We have covered the difference between GST and income tax India in the following section.
Key Differences Between GST and Income Tax:
GST vs. Income Tax : The primary difference between GST and income tax is that the former is assessed on the consumption of goods and services, whilst the latter is assessed on an individual’s income. In a sense, income tax is a direct tax, whereas GST is an indirect tax.
| Comparison Parameter | Gst | Income Tax |
|---|---|---|
|
Meaning or Definition |
GST is levied on the consumption of goods and services. |
Income Tax is levied on the income made by a person in a particular year. |
|
Tax Class |
It is an indirect tax that the government receives. |
It is a direct tax that is paid to the government. |
|
Standards for tax filing GST |
If the annual turnover exceeds 40 lakh rupees, registration is necessary. |
Income tax must be paid if a person's annual income exceeds 2.5 lakh rupees. |
|
Norms for paying taxes |
The end client may be responsible for paying the tax. |
The individual cannot shift the burden to another person because they are responsible for paying tax if their income exceeds 2.5 lakh rupees. |
|
Groups of Tax |
GST is assessed on the products bought and the services rendered. |
Salary, real estate, capital gains, and other types of income are all subject to income tax. |
|
Coverage |
Since taxes are levied on every member of society, it has a broad scope. |
It is only applicable to a taxpayer who is an individual or a corporation. |
|
Transferability |
It is transmittable from one individual to another. |
It cannot be given to another person. |
GSTR and ITR: Additional Information
GST vs. Income Tax: The primary difference between GST and income tax is that the former is assessed on the consumption of goods and services, whilst the latter is assessed on an individual’s income. In a sense, income tax is a direct tax, whereas GST is an indirect tax.
GST: The GST is a thorough, multistage, and destination-based tax. Because it has combined multiple indirect taxes into a single form, it is known as comprehensive. Indirect taxes, including the central excise duty, services tax, additional customs charge, and several types of value-added tax, have been substituted by it.
GST is a destination-based tax since it is assessed based on the final destination rather than the source. As a result, the tax burden might be transferred from one individual to another.
GST was adopted as a single indirect tax for the entire nation, preventing the cascading of many taxes. You can file your GST online.
Income Tax: The government levies income tax on income. It is one of the significant sources of revenue for the federal government. The revenue from taxes is invested in the growth of the nation. A person’s tax burden directly relates to their income, so the more they make, the higher their tax burden will be.
Conclusion
The government has enacted various laws requiring its residents to pay taxes on time and in the correct amount. The primary difference between income tax and GST is that the latter is an indirect tax, whereas the former is a direct tax.
They make a considerable financial contribution to the governments. Both income tax and GST are owed in your role as an individual and a consumer, respectively. The government needs both taxes to fund infrastructure development projects and other goals. While GST is paid by everyone when they buy products and use services, income tax is only payable if they fall under a specified salary range.