Question

Find out more about taxes that are collected at present. Are these in cash, kind or labour services?

Answer 1

Hint:
A Tax is a mandatory fee or financial charge levied by government or organization on an individual to collect revenue for public works essential needs such as; Infrastructure, Water supply, electricity, security and others. The collected funds by an individual are used for different public expenditure programmes.

Complete answer:
Basically taxes are two types, Direct Tax and Indirect Tax.

Direct Tax – A direct tax is paid directly by an individual or organization to the imposing entity.
- A taxpayer pays the direct taxes to the government for different purposes. Such as; Income Tax, Property taxes and other taxes.
- Direct Taxes are based on the ‘ability to pay principle’. This economical principle states that those who have more resources or earn a higher income should pay more taxes.
- The ability to charge taxes is a way of redistributing the wealth to a nation for their development.
- Direct taxes cannot be passed to a different person or entity; it is given to the government directly.

Indirect Tax – An indirect tax is collected by one entity in the supply chain (basically a producer or retailer) and paid to the government. It can be defined as taxation on an individual or entity which is ultimately paid by another person. Examples: - Taxes on Import duties, Fuel, Liquor and Cigarette etc.

Destination Tax – Destination Tax is applied on the destination and consumption based goods and services.

Origin Tax – Origin tax is applied on the production based goods and services.

Goods and Services Tax (GST) –
- The government of India, following the credo of ‘one nation and one tax’ and wanting a unified market in order to ensure the smooth flow of goods across the country.
- GST was implemented from 1st July 2017.
- This initiative of the government has made life easier for manufacturers, producers, investors and consumers in the terms of giving one tax rather than many taxes.
- GST is a destination based single tax on the supply of goods and services from the manufacturer to the consumers and also replaced multiple indirect taxes levied by the Central and the state government.

Note:
GST council has fixed the rate of tax as 5%, 12%, 18% and 28% on various commodities.
Basically, GST is three types such as,

- CGST (Central Goods and Services Tax) - The tax levied at the central level is called CGST.
- SGST – State Goods and Services Tax - The Tax levied at the state level is called SGST.
- IGST – Inter State Goods and Services Tax- The Tax levied at the inter-state level is called IGST.