Ad valorem tax is imposed on:
Options
AValue
BWeight
CUnit
DVolume
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Public FinancePYQ - Dec 2021 (Inter)Question 140 of 20
All Questions Correct Answer
✅ Option a — Value
All Options:
- AValue
- BWeight
- CUnit
- DVolume
Detailed Solution & Explanation
To understand which option is correct, let's break down the concept of ad valorem tax.
• Ad valorem tax is a type of tax that is imposed on the value of a product or service.
• This means that the tax amount is calculated as a percentage of the value of the item being taxed.
• The term "ad valorem" itself is Latin for "according to value", which directly indicates that the tax is based on the value of the item.
The correct answer is based on the definition of ad valorem tax, which clearly states that the tax is imposed on the value of the item.
• Options like weight or volume are incorrect because they are more related to specific taxes or duties that are imposed on the quantity or size of the item, rather than its value.
• For example, a tax imposed on the weight of an item would be a different type of tax, not an ad valorem tax.
This understanding is crucial in business economics as it helps in calculating the total cost of a product or service, including taxes.
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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