GST is best described as:
Options
ADirect Tax
BIndirect Tax
CWealth Tax
DCorporate Tax
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Public FinancePYQ - Nov 2020 (Inter)Question 125 of 20
All Questions Correct Answer
✅ Option b — Indirect Tax
All Options:
- ADirect Tax
- BIndirect Tax
- CWealth Tax
- DCorporate Tax
Detailed Solution & Explanation
To understand the nature of GST, we need to break down the concept:
• GST stands for Goods and Services Tax, which is a tax levied on the supply of goods and services.
• This tax is indirect because it is not directly paid by the person who bears the ultimate economic burden, but rather it is collected by the seller from the buyer.
• The key characteristic of an indirect tax is that it can be shifted or passed on to another person, in this case, the consumer.
• GST is a consumption-based tax, meaning it is levied on the value added at each stage of production and distribution, making it an indirect tax.
The correct classification of GST as an indirect tax is due to its nature of being levied on goods and services and the ability to pass it on to the consumer.
Options like Direct Tax and Corporate Tax are incorrect because direct taxes are levied directly on individuals or businesses and cannot be passed on, and corporate tax is a specific type of direct tax levied on companies.
About This Chapter: Public Finance
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Fiscal Policy, Budget, Market Failure
This chapter deals with government finances — how the government earns (taxation) and spends (expenditure) money. Key topics include Fiscal Policy, types of taxes (Direct and Indirect), the Union Budget, Public Debt, and the concept of Market Failure and how government intervention corrects it.
View Official ICAI SyllabusExam Strategy Tip
Focus on the difference between Revenue and Capital items in the budget. Understand Fiscal Deficit and its implications. Tax-related MCQs are commonly asked.
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