A brief understanding about Indirect taxes

An indirect tax is a tax that is paid to the government by one entity in the supply chain, but it is passed on to the consumer as part of the price of a good or service. The consumer is ultimately paying the tax by paying more for the product.

An indirect tax may increase the price of a good to raise the price of the products for the consumers. Examples would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately, the manufacturer transfers the burden of this duty to the buyer of the car in the form of a higher price.

A brief understanding about Indirect taxes

The most common example if an indirect tax is import duties. The duty is paid by the importer of a good at the time it enters the country. If the importer goes on to resell the good to a consumer, the cost of the duty in effect is hidden in the price that the consumer pays. The consumer is likely to be unaware of this, but he will nonetheless be indirectly paying the import duty.

Essentially, any tax or fees imposed by the government at the manufacturing or production level is an indirect tax.

What are the features of Indirect tax?

Indirect taxation is policy commonly used to generate tax revenue. Indirect tax is so called as it is paid indirectly by the final consumer of goods and services while paying for purchase of goods or for enjoying services. It is broadly based since it is applied to everyone in the society whether rich or poor.

What is excise duty?

Excise duty is a governmental tax meant for producers and manufacturers on certain goods.

Manufacturers are considered to be:

• ·        Entities that manufacture goods themselves.
• ·        Entities that outsource manufacturing, but manufacturing takes place from their name

To cover these costs, manufacturer adds them to cost of goods sold, where the buyer ends up paying for these costs. Thus, it is considered to be an indirect tax.

Advantages

They are convenient to both the tax-payer and the State. The tax-payers do not feel the burden much, partly because an indirect tax is paid in small amounts and partly because it is paid only when making purchases. But the convenience is even greater due to the fact that the tax is "price-coated". Indirect taxes can be spread over a wide range. Very heavy direct taxation at just one point may produce harmful effects on social and economic life. As indirect taxes can be spread widely, they are more beneficial and suitable.

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WHAT IS INCORPORATION?

Incorporation is the legal process used to form a corporate entity or company. A corporation is a separate legal entity from its owners, with its own rights and obligations. Corporations can be created in nearly all countries in the world and are usually identified as such by the use of terms such as "Inc." or "Limited" in their names.

Creation and Organization of Corporations

Incorporation involves drafting legal documents called "Articles of Incorporation" that list the primary purpose of the business, its name and its location, and the number of shares and class of stock being issued, if any. Incorporation also involves jurisdiction-specific registration information and fees.

Why one needs to incorporate their business?

Once you incorporate your business, you will help your organization to develop by creating a line, which will determine who has the rights to make the final decisions.

Furthermore, when a person incorporates his business, he is making a brand new entity, which assist in creating the line which separates the personal finances and the business finances. When you finally incorporate your business, all of the employees in your company will have protection in case something catastrophic happens regarding your financial situation.

Through company incorporation involving a pty limited company, one produce stocks which investors can buy hoping that the stock’s value will get bigger and in the meantime one would accomplish company success. The company incorporation will let the investors buy and sell stocks leaving the investment responsibility in the possession of stock investors.

Advantages of Incorporation

Incorporation has many advantages for a business and its owners, including protection of the owner's assets, because the company is liable for its own debts. It includes easy transfer of the business ownership to another party through the sale of shares.

·    Protect Your Personal Assets: Incorporating your business is one of the best ways you can protect your personal assets. A corporation can own property, carry on business and incur liabilities

·  Have Easier Access to Capital: Raising capital is generally easier for a corporation, since a corporation can issue shares of stock. This may make it easier for your business to grow and develop. In most cases, banks would rather lend money to corporations than to unincorporated business ventures. Corporations generally have access to more alternative sources of capital through which they can pay off their debts.

·   Enhance Your Business’ Credibility: The benefits of incorporating go beyond finances. In a sense, having “Inc.” or “Corp.” after your business name conveys permanence, credibility, and stability, and communicates your commitment to the ongoing success of your business venture.

MAHAVEER SINGHVI & ASSOCIATES provide wide range of services. For more details, visit our website at http://www.ca-msa.com/