What is tax impact and tax incidence?

The final burden of tax is known as tax incidence and the initial burden of tax is known as tax impact. Tax incidence is upon the person who eventually pays it and the tax impact is upon the person from whom the tax is collected. You can read about the Taxation in India – Direct taxes & Indirect Taxes, Features of Taxation System in the given link.

Tax incidence will fall on the consumers who pay the price for buying a product, and the tax impact will fall upon the producers for producing a product.

Further readings:

  1. Economics Notes For UPSC Examination
  2. UPSC Mains General Studies Paper-III Strategy, Syllabus & Structure

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