Since the retailer has already paid taxes of Rs. 500 to the manufacturer, they will only pay the balance of Rs. 50 to the government. This article explores the meaning of indirect tax, its features, advantages, disadvantages, and examples, with a particular focus on India. For instance, if you buy a property, the stamp duty must be paid in full per the state government’s taxation rates. For instance, when you avail of various services like booking a hotel or cab services, you are liable to pay an indirect service tax on the value of the service. The above formula takes the cell reference A1 as the input argument (within double quotes as a text string) and returns the value in this cell, which is 123. The INDIRECT function in Excel creates an indirect reference to a cell, sheet, or workbook.

But let’s not put the cart before the horse, and run through several Excel Indirect formulas, one at a time. “Direct and Indirect taxes are like two equally fair sisters to whom as Chancellor of Exchequer, he had to pay equal addresses”. (i) A very serious objection leveled against indirect taxation is that it is regressive in character.

Indirect Tax Examples

When a good enters the country, the importer is responsible for paying the duty. The cost of the duty is essentially disguised in the price that the customer pays if the importer decides to resale the product to a consumer. Although the consumer is most likely ignorant of this, they are nonetheless indirectly responsible for paying the import duty.

Businesses can deduct the VAT they’ve paid on inputs, and the consumer ultimately pays the total VAT. (iii) Direct tax is to be paid in lump some every year while income which a person earns is received in small amounts. It often becomes difficult by taxpayers to pay large amounts in one installment. Duty charged by the government on the production of certain items is called Excise Duty.

• For those looking for assistance with tax filing, TaxBuddy offers a range of services designed to simplify your tax compliance process.
• Working with an adviser may come with potential downsides, such as payment of fees (which will reduce returns).
• However, the tax burden is shifted to the customer as a part of the item’s cost.
• Tax on the wealth of the assessee, determined by the property he/she owns and the market value of that property.
• Therefore, our INDIRECT formula interprets the value in cell C3 (R2C1) as a reference to the cell at the conjunction of row 2 and column 1, which is cell A2.
• It is a fee levied by the government of the respective country or territory on income, activities, goods, and services.

Domestic Companies and Foreign Companies (who earn income in India) are required to pay Corporate Tax. Further, it includes Securities Transaction Tax (STT), Dividend Distribution Tax (DDT), Fringe Benefits Tax, Minimum Alternate Tax (MAT), etc. Working with an adviser may come with potential downsides, such as payment of fees (which will reduce returns). There are no guarantees that working with an adviser will yield positive returns.

Summary

Contrarily, income tax is the best illustration of a direct tax because it is paid directly by the individual who receives the income. Another blatant instance of direct taxation is the payment of entrance fees to a national park. A tax that is levied on a transaction is known as an indirect tax. In contrast, a direct tax is one that is levied against a property, an organization, or a person directly. Indirect Taxes are a crucial aspect of a nation’s tax system, playing a vital role in revenue generation, and influencing economic behavior.

The INDIRECT function syntax has two parameters where one is mandatory, and the remaining one is optional. A common problem with non-English localizations is not the INDIRECT function’s name, but rather different Regional Settings for the List Separator. In the standard Windows configuration for North America and some other countries, the default List Separator is a comma. While in European countries, the comma is reserved as the Decimal Symbol and the List Separator is set to semicolon. To make more complex 3-level menus or drop-downs with multi-word entries, you will need a bit more complex INDIRECT formula with a nested SUBSTITUTE function. You can use Excel INDIRECT together with the ADDRESS function to get a value in a certain cell on the fly.

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Common examples of indirect taxes include sales tax, indirect tax definition value-added tax (VAT), and excise taxes. Sales tax is added to the price of most goods and services you buy. VAT is similar but is applied at each stage of production and distribution. Excise taxes are specific taxes on certain goods, like alcohol or tobacco, and are included in the price you pay at the store.

Example #1: Indirect Cell Reference Using R1C1 Style

As of now, we have seen a single cell reference with the INDIRECT function. FALSE in the 2nd argument indicates that the referred value (C3) should be treated like a R1C1 cell reference, i.e. a row number followed by a column number. Therefore, our INDIRECT formula interprets the value in cell C3 (R2C1) as a reference to the cell at the conjunction of row 2 and column 1, which is cell A2. The formula refers to cell C1, fetches its value – text string A2, converts it into a cell reference, heads over to cell A2 and returns its value, which is 222. The Excel INDIRECT function returns a valid cell reference from a given text string. INDIRECT is useful when you want to assemble a text value that can be used as a valid reference.

In all, the government receives a total tax of Rs. 550 (Rs. 500 from the manufacturer and Rs. 50 from the retailer). This is divided into Rs. 5,500 as the selling price and Rs. 550 as taxes. As seen in the above table, the manufacturer collects Rs. 500 tax on the selling price of Rs. 5,000 from the retailer. Since the manufacturer has not paid any taxes to the government earlier, he will pay the entire Rs. 500 collected from the government. Also known as the Central Value Added Tax, Excise Duty applies to all goods produced within the country’s borders.

Excel INDIRECT Function – Overview

• Another blatant instance of direct taxation is the payment of entrance fees to a national park.
• The cost of these taxes is built into the price of products or services, often going unnoticed by consumers.
• Buying gas for a vehicle has an additional indirect tax cost attached to it.
• Also, in case the text string in cell C1 is not a valid cell reference, the Indirect function would return the #REF!
• By comparing indirect taxes to direct taxes, one may define indirect taxes.

Just like the SUM function, you can also use functions such as LARGE, MAX/MIN, COUNT, etc. Now let’s dive in and have a look at some examples on how to use the INDIRECT function in Excel. But before I get into the examples, let’s first have a look at its syntax. To begin with, I suggest you learn about the VLOOKUP, SUMIF, and IF functions (my top favorite Excel functions).

An indirect tax is paid to the government by one party in the supply chain. It is then transferred to the customer as part of the cost of a good or service. The final recipient of the tax is the consumer, who pays extra for the goods. The laptop costs USD 1,000, but you also have to pay a 10% sales tax. The USD 100 is the indirect tax that is collected by the seller.

The INDIRECT function took the cell reference to cell C6 as a string indirectly from cell E2 and returned the value from cell C6. The Indirect formula that refers to a different Excel workbook is based on the same approach as a reference to another spreadsheet. You just have to specify the workbook’s name is addition to the sheet name and cell address. The formula in C5 concatenates the text in B5 to the string “!A1” and returns the result to INDIRECT. The INDIRECT function then evaluates the text and converts it to a valid reference.

Cess, excise duties, and central surcharges are now all under CGST. It is mainly levied upon the intra-state movement of goods and services. Direct taxes, on the other hand, are imposed on and collected from the taxpayer with the legal obligation to pay the tax and cannot normally be shifted to another person.

A tax is said to be direct tax whenimpact and Incidence of a tax are on one and same person, i.e., when a person on whom tax is levied is the same who finally bears the! In essence, an indirect tax is any tax or levy levied by the government at the level of production or industry. Indirect tax works by being added to the price of goods and services. When you buy something, the seller includes the tax in the total price. So, while you pay the tax, you might not realize it because it’s included in the price you see. The company projected over $750 million in direct and indirect tax revenue from the proposed tax breaks and those approved in 2014.