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Question

Consider the following statements:

1. Income tax is a direct and progressive tax
2. GST is an indirect tax.

Which of the above are correct?

A

1 only
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B

2 only
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C

Both 1 and 2
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D

None of the above
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Solution

The correct option is C
Both 1 and 2
Income tax is a direct and progressive tax.

A Direct tax is imposed directly on the taxpayer and paid directly to the government by the ones on whom it is imposed. A progressive tax is a tax in which the tax rate increases as the taxable amount increases.

The term progressive refers to the way the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less than the person's marginal tax rate

Indirect tax that is levied by the government on one entity (Manufacturer of goods), but is passed on ( to the final consumer by the manufacturer). The incidence and impact of the tax fall on different persons. Eg:GST

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