# Overview of Tax: Direct vs Indirect
## What is a Tax?
A tax is a compulsory financial charge imposed by the government. The word compulsory is critical — taxes are not voluntary payments like donations or gifts. If you fall within the scope of the law, you must pay; refusal triggers legal consequences.
## Classification of Taxes
Indian taxes are broadly classified into two families:
```
TAXES
|
+---------+---------+
Direct Taxes Indirect Taxes
```
### Direct Taxes
The person who pays the tax is also the person who bears the burden of it. Burden cannot be shifted to anyone else.
Examples:
- Income Tax
- Black Money Tax
### Indirect Taxes
The person who pays the tax to the government is different from the person who ultimately bears the burden. The burden is shifted forward, typically from the seller (who collects and deposits) to the buyer (who actually pays in the price).
Examples:
- Goods and Services Tax (GST)
- Customs Duty
## The Test: Who Bears vs Who Pays
The defining feature is the incidence vs impact distinction:
| Pays to Government | Bears the Burden | |
|---|---|---|
| Direct Tax | Same person | Same person |
| Indirect Tax | One person (e.g., supplier) | Different person (e.g., consumer) |
This is why GST is called an indirect tax — the shopkeeper deposits it, but the final consumer bears it in the price.