Q. With reference to the concepts of taxation, consider the following statements:
1.The incidence of tax refers to the point where the tax is imposed.
2.The impact of tax refers to the point where the effect of the tax is felt.
Which of the statements given above is/are correct?
Answer: C
Notes:
Explanation:
- The incidence of tax is the point or event at which the tax is levied. It refers to the initial legal imposition of the tax — i.e., who is legally responsible for paying it to the government.
- The impact of tax is the after-effect, where the burden of the tax is ultimately borne. This could be by the same person on whom the tax is levied (in case of direct taxes) or passed on to someone else (as in indirect taxes).
Source- TMH Indian Economy by Ramesh Singh
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