NAME: DEUKO PEMALIEU DARLYN CAREL

CLASS: ACCOUNTING AND TAXATION

COURSE: PUBLIC SECTOC ACCOUNTING

ASSIGNMENT 1: Difference between Tax and Duties

The government earns revenues from various sources, and one of its principal means of income is tax
and duty. They help the government to provide public utility services to the people of the country like
medical, railway, postal, education, banking, food, infrastructure, etc. Tax is the financial charged
levied by the Government on the income, activity or commodity. It is into two main categories Direct
Tax and Indirect Tax. Direct tax includes income tax or wealth tax. On the other hand, Indirect Tax
also has two divisions, i.e. taxes and duties, wherein taxes include Goods and Services Tax,
while duty includes custom duty or excise duty. the main difference between tax and duty, is that the
scope of tax is wider in comparison to duty, i.e. the latter is the subtype of the former.

Comparison Chart

BASIS FOR
TAX DUTY
COMPARISON

Meaning Tax is a mandatory obligation Duty is a fee charged by the government on

payable to the government. manufacture and import / export of goods.

Levied on Income, wealth, services, sales Goods and financial transactions.

etc.

Types Direct Tax and Indirect Tax Custom Duty and Excise Duty

Scope Wide Narrow

Authority to impose Central or State Government. Central Government

Definition of Tax

Tax is a compulsory financial obligation levied by the government on income, goods, and activities. It
is one of the basic sources of government income which is utilised for providing various services to
the people. The authority to impose the tax is in the hands of Central and State Government. There
are two major types of taxes, which are as under:

1. Direct Tax: The tax, which is charged on the income or wealth of a person is known as the
Direct tax. Here the tax burden falls on the person himself, i.e. taxpayer and tax bearer is the
same person. It is a tax in which the money is directly transferred from an individual’s pocket
to the government’s pocket. The types of direct tax are:

 Income Tax: Tax levied on the income of a person.

 Wealth Tax: Tax charged on the wealth of a person.

  Others: It includes entertainment tax and interest tax.

2. Indirect Tax: The tax, which is charged on the goods or services, is known as indirect taxes.
Here, the tax burden is shifted to another person, i.e. the taxpayer and tax bearer both are two
different persons. It is a tax in which the money is first transferred from an individual to the
taxpayer and then to the government. The division of indirect taxes is as under:

 On goods:

 VAT (Value Added Tax): Tax on intrastate sales.

 CST (Central Sales Tax): Tax on interstate sales.

 Customs Duty: Tax on the manufacture of goods.

 Excise Duty: Tax on import or export of goods.

 Others: Octroi, Entry Tax, etc.

 On Services:

 Service Tax

Definition of Duty

A duty is a kind of tax payable to the government, charged on goods and financial transactions. It
comes under the category of Indirect tax. The right to levy duty is in the hands of the Central
Government. It also adds to the revenue of the government. The following are the types of duties:

 Excise Duty: Tax levied on the production of goods within the country is known as Excise
Duty. It is also known by the name Central Value Added Tax (CENVAT). Central Excise
Act, 1944 and the Central Excise Tariff Act, 1985 are the two important statutes which
govern the Excise Duty in India. At present, the rate of excise duty in the country is 12%.

 Customs Duty: When the goods are traded outside India then the tax levied by the
Government of India is known as Customs Duty. It is charged on the import and export of the
commodities. Customs Duty is governed by the Customs Act, 1962 and Customs Tariff Act,
1975. The tax charged on imports is known as Import Duty whereas the tax on exports is
known as Export Duty.

Key Differences Between Tax and Duty

The following are the major differences between tax and duty:

1. Tax is a financial obligation which is to be paid to the government compulsorily. Duty is a fee
payable to the government on the manufacture and import/export of goods.

2. The duty itself is a type of tax.

3. Tax is charged on individuals, wealth, services and sales, whereas Duty is charged on goods.

4. There are two major types of taxes, i.e. Direct Tax and Indirect Tax. Conversely, the major
types of duties are Excise Duty and Customs Duty.

5. The Central Government or State Government can impose taxes, but only the Central
Government has got the authority to levy duty.