Merits of an indirect tax are :
(i) Wide coverage : Unlike direct taxes, the indirect tax have a wide coverage. Majority of the products or services are subject to indirect taxes. The consumers or users of such products and services have to pay them.
(ii) Elastic: Some of the indirect taxes are elastic in nature. When government feels it necessary to increase its revenue, it increases these taxes. In times of prosperity indirect taxes produce huge revenue to the government.
(iii) Dificult to evade: Indirect taxes have in built safeguard against tax evasion. The indirect taxes are paid by customers and the sellers have to collect it and remit to the government. In many products, the selling price is inclusive of indirect tax. Therefore, the customer has no option to evade the indirect taxes.
(iv) Universality : Indirect taxes are paid by all classes of people and so they are broad based. Poor people may be out of the net of the income tax, but they have to pay indirect taxes while buying goods.
(v) Social Welfare: These taxes promote social welfare. The amount collected by way of taxes is utilized by the government for social welfare activities, including education, health and family welfare. Secondly, very high taxes are imposed on the conssumption of harmful products such as alcoholic products, tobacco products and such other products. So, it is not only to check their consumption but also enables the state to collect substantial revenue in this manner.