Question

UPSC Prelims 2014 Question:

The sales tax you pay while purchasing a toothpaste is a

1. Tax imposed by the Central Government
2. Tax imposed by the Central Government but collected by the State Government.
3. Tax imposed by the State Government but collected by the Central Government.
4. Tax imposed and collected by the State Government.

Answer (Detailed Solution Below)

Option 4: Tax imposed and collected by the State Government.

Detailed Solution

Explanation:

A sales tax is a consumption tax imposed by the Government on the sale of goods and services. A conventional sales tax is levied at the point of sale, collected by the retailer, and passed on to the Government. Sales tax is imposed and collected by the State Government.
The tax on toothpaste will therefore be under the state government.
However, now it has been subsumed under the ambit of GST.

Therefore, option (4) is the correct answer.

Subject: Economics | Taxation

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