Indirect taxes are levied on consumption, expenditures, transactions, and goods rather than direct earnings. Value Added Tax (VAT) is a multi-stage consumption tax collected at each node of the production and distribution chain. It utilizes an input-output tax credit mechanism to ensure that only the final consumer bears the total tax burden.

[ Supplier ] --Pays Input VAT--> [ Manufacturer ] --Pays Input VAT--> [ Retailer ] --Collects Output VAT--> [ Consumer ]

Excise duties are selective taxes placed on specific goods or activities. They are typically applied to luxury items (high-end electronics, sports cars) or products that generate negative societal externalities (tobacco, alcohol, sugary drinks). When applied to harmful items, they are called Pigouvian taxes, designed to raise revenue while intentionally suppressing consumption.

Customs duties are tariffs imposed on goods imported into a country. They serve a dual purpose: raising public revenue and protecting domestic industries from foreign competition. Modern customs administration relies heavily on international valuation standards, harmonized coding systems, and regional trade agreements (such as free trade areas or customs unions).