## What is Tax?
Tax is the "cost of living in society". The Government levies (charges) taxes to meet common welfare expenditure of the society (defence, roads, hospitals, subsidies, etc.).
Without taxes, the State cannot fund the public goods it provides — so paying tax is essentially the price every citizen pays for living under an organised government.
## The Two Branches of Tax
Taxes are broadly classified into two categories:
| Feature | Direct Tax | Indirect Tax |
|---|---|---|
| What is taxed? | Income or wealth of a person | Price of a good or service |
| Who bears the burden? | The person who earns — burden cannot be shifted | The buyer/consumer — burden is shifted by the seller |
| Trigger | Earning income / owning wealth | Buying goods or availing services |
| Examples | Income Tax | GST, Customs Duty |
### Key Distinction — "Shifting of Burden"
- Direct Tax → Jo paise kamayega, usko tax dena padega. The taxpayer and the person who bears the economic burden are the same person.
- Indirect Tax → Sabko tax dena padega jab bhi koi goods ya services kharidenge. The seller pays the tax to the Government but passes on the incidence to the buyer through a higher price.
### Why this classification matters
The CA Inter Direct Tax paper deals only with Income Tax — a direct tax on income. GST and Customs (indirect taxes) are studied separately. Understanding which side of the line a levy falls on tells you which statute and which authority governs it.