Why Are Direct Taxes More Important Than Indirect Taxes?

Ahmedabad, a bustling city with a thriving economy, is witnessing a surge in individuals…

Read More

Ahmedabad, a bustling city with a thriving economy, is witnessing a surge in individuals enrolling in Accounting Certificate Courses in Ahmedabad. As these aspiring accountants, acquiring a deep understanding of taxes is imperative.

Taxes constitute a significant revenue stream for the government, sourced from various aspects of our daily lives. Whether it’s the income we earn, the meals enjoyed at a restaurant, the cinematic experience at a multiplex, the use of roads for commuting, or even the simple act of purchasing a packet of biscuits from a general store – diverse forms of taxes are embedded in numerous aspects of our routine.

Understanding the intricacies of the different tax categories prevalent in India is equally crucial. The tax landscape in the country can be broadly divided into two main categories – direct and indirect taxes. Delving into the nuanced definitions and implications of these tax types provides a comprehensive perspective on our fiscal responsibilities.

As students delve into the intricacies of taxation, one question emerges: Why are direct taxes considered more crucial than indirect taxes?

Before we get into the important kind of tax, let’s understand taxes first.

What Is Direct Tax?

In straightforward terms, a direct tax is a levy that individuals directly remit to the authority imposing the tax. For example, income tax is mandated by the government, and individuals pay it directly to the governmental entity. These taxes are not transferable to any other entity or person. There exist several acts governing direct taxes.

In India, the administration of direct taxes falls under the purview of CBDT (Central Board of Direct Taxes), overseen by the Department of Revenue. This department not only manages the execution of direct taxes but also actively participates in planning and offering insights to the government concerning the implementation of direct taxes.

Common Types Of Direct Taxes In India

1. Income Tax:

The predominant form of direct tax in India is income tax. It is levied on the income earned in a financial year, guided by the income tax slabs set by the IT department. Individuals and businesses directly remit this tax to the IT department. Individual taxpayers can benefit from various tax deductions under different sections of the IT Act.

2. Securities Transaction Tax:

Engaging in stock trading incurs a small component known as the securities transaction tax for each trade. Regardless of whether the trade resulted in profits or not, this tax must be paid. Brokers collect this tax from traders, passing it on to the securities exchange, which subsequently remits it to the government.

3. Capital Gains Tax:

Each instance of capital gains triggers the obligation to pay capital gains tax. Whether arising from property sales or investments, the payment is determined by the capital gains and the duration of investment holding. Taxpayers must pay either LTCG (Long-Term Capital Gains) tax or STCG (Short-Term Capital Gains) tax based on specific criteria.

Indirect Tax Explained

Indirect taxes differ from direct taxes as they are not directly paid to the government by individuals. Instead, these taxes are levied on goods and services, creating a distinction from taxes imposed directly on income and profits. Unlike direct taxes, indirect taxes involve intermediaries who collect them from end-consumers, with the responsibility of passing on the received tax to the government.

Crucially, indirect taxes are not income-dependent, applying the same tax rate universally. The Central Board of Indirect Taxes and Customs (CBIC), operating under the Department of Revenue similar to CBDT, is the key authority overseeing indirect taxes in India.

Common Types Of Indirect Taxes In India

1. Goods and Services Tax (GST):

GST, a comprehensive indirect tax, amalgamated 17 different taxes like Service Tax, Central Excise, and State VAT. Applied to all goods and services based on GST council tax slabs, GST eliminated the cascading effect of the previous tax system.

2. Customs Duty:

Levied on imported items, regardless of the mode of transport (air, land, or sea), customs duty ensures taxation on every product entering India from a foreign country.

3. Value Added Tax (VAT):

VAT, a consumption tax, is imposed by state governments on products as their value increases throughout the supply chain. Although GST largely replaced VAT, some items, especially those containing alcohol, still incur VAT.

Why Are Direct Taxes More Important Than Indirect Taxes

Direct Taxes: A Foundation of Fiscal Responsibility

Direct taxes, including income tax, wealth tax, and capital gains tax, form the backbone of a nation’s fiscal responsibility. Unlike indirect taxes, which are levied on goods and services, direct taxes are imposed on individuals and businesses directly. This ensures a fair and equitable distribution of the tax burden, aligning with principles of social justice.

1. Progressivity and Fairness

Direct taxes exhibit progressivity, meaning the more one earns, the higher the percentage of income paid in taxes. This progressive nature ensures that those with higher incomes contribute proportionately more to government revenue. In contrast, indirect taxes, often regressive, impact lower-income groups more significantly.

2. Revenue Stability

Direct taxes provide a stable and predictable source of revenue for the government. As individuals and businesses pay taxes based on their earnings and profits, the government can forecast revenue streams more accurately. This stability facilitates effective fiscal planning and budgetary allocations, fostering economic stability.

Indirect Taxes: The Challenges They Pose

While indirect taxes play a role in government revenue, their nature introduces challenges that make them less favorable compared to direct taxes.

1. Burden on Lower Income Groups

Indirect taxes, such as the Goods and Services Tax (GST), tend to place a relatively higher burden on lower-income groups. Basic necessities, which constitute a significant portion of expenditure for these groups, are subject to the same tax rates as luxury goods.

2. Inflationary Pressures

The cascading effect of indirect taxes can contribute to inflationary pressures. Taxation at multiple stages of production and distribution can lead to increased prices for goods and services, affecting consumers and potentially slowing economic growth.


In the landscape of taxation, direct taxes emerge as the cornerstone of a fair and sustainable fiscal policy. As individuals pursue an Accounting Certificate Course in Ahmedabad from Super 20 Training Institute, recognizing the importance of direct taxes becomes integral to navigating the complexities of financial management.

In conclusion, the emphasis on direct taxes over indirect taxes stems from principles of fairness, progressivity, and revenue stability. As the accounting professionals of tomorrow undergo training in Ahmedabad, a profound understanding of these principles will undoubtedly shape their approach to taxation and financial management.

Steps for Enrolling an External Application with a Gateway System?

Introduction In the realm of SAP, registering an external program on the Gateway is…

Read More


In the realm of SAP, registering an external program on the Gateway is a critical task for seamless integration and communication. This article serves as a comprehensive guide on the steps involved in registering an external program on the SAP Gateway. Aspiring SAP FICO professionals in Ahmedabad and beyond will find this guide invaluable in enhancing their skills and understanding of SAP integration.

Understanding the Need for External Program Registration

Before delving into the registration process, it’s crucial to grasp why registering an external program on the Gateway is essential. SAP systems often need to communicate with external programs or systems, and the Gateway acts as the bridge facilitating this communication. Registering an external program ensures that SAP can identify and communicate with it effectively.

Steps to Register an External Program on SAP Gateway

Step 1: Open Transaction SM59

To initiate the registration process, open the SAP GUI and enter transaction code SM59. This transaction code allows you to manage and configure RFC (Remote Function Call) connections.

Step 2: Expand “Connection Type T”

In the SM59 transaction, navigate to the “Connection Type T” section. This is where you configure TCP/IP connections, which are commonly used for external program integration.

Step 3: Double-Click the Destination Name

Identify the destination name associated with the external program you want to register. Double-click on it to access detailed configuration settings.

Step 4: Configure RFC Settings

Within the destination configuration, you’ll find various tabs for different settings. Configure the RFC (Remote Function Call) settings according to the requirements of the external program. This includes specifying the program ID, gateway host, and gateway service.

Step 5: Save and Test the Connection

Once the RFC settings are configured, save the changes and proceed to test the connection. Testing ensures that the SAP system can establish a successful connection with the external program.

Step 6: Create Registration Information

Navigate to the SAP Gateway (SMGW) and go to “Expert Functions” > “External Security” > “Create Reg Info.” Highlight the relevant entry for your external program and create registration information.

Importance of External Program Registration for SAP FICO Professionals

Understanding how to register external programs on the Gateway is particularly crucial for SAP FICO professionals. In SAP FICO (Financial Accounting and Controlling), seamless communication between SAP systems and external programs is vital for financial data integration, reporting, and analysis.


In conclusion, registering an external program on the SAP Gateway is a fundamental skill for SAP professionals, especially those specializing in SAP FICO. This guide provides a step-by-step approach to the registration process, empowering SAP FICO enthusiasts in Ahmedabad and beyond to enhance their proficiency in SAP integration.