1. Lack of civic consciousness: A person who buys a commodity does not know that he is paying tax to the government in the price of the commodity. Therefore, such taxes do not create civic consciousness among the majority of tax payers.
2. Feed inflation: Imposition of these taxes tends to raise the prices of commodities, thereby leading to higher cost, wages and prices.
3. Bad effect on production and employment: These taxes adversely affect production of commodities and employment.
4. Uncertain revenue: The revenue from indirect taxes is uncertain because it is not possible to accurately estimate the effect of such taxes on the demand for products.
5. Regressive: Indirect taxes on necessaries, which are consumed by the poor are regressive in nature. The rich and the poor are required to pay the same amount of tax on such commodities.
6. Uneconomical: These taxes are uneconomical in that the cost of collection to the state is heavy. The state has to appoint officers to check the account and stocks of producers, wholesalers, and retailers in order to find out whether they are paying taxes.
Wilfykil answered the question on February 13, 2019 at 08:16