Which of the following is an example of an indirect tax?

Appeared in: DSSSB - 28 August 2019 (Shift-1)

Explanation

Sales Tax is an indirect tax because it is levied on the sale of goods and services.
The tax is collected by the seller (an intermediary) from the buyer (the consumer).
The ultimate financial burden (incidence) of the tax falls on the final consumer, not the seller who remits it to the government.
This ability to shift the tax burden is the defining characteristic of an indirect tax.

Option A: Corporation Tax is a direct tax, not an indirect tax. It is levied directly on the profits of a corporation.
Option B: Wealth Tax is a direct tax imposed on an individual's or entity's net worth. The burden cannot be shifted.
Option C: Income Tax is a prime example of a direct tax. It is levied on the income of individuals and entities, and they pay it directly to the government.

Clinical Relevance

Nursing practice connection: This is primarily an exam-oriented knowledge point with limited direct bedside application, so retain Difference between Direct and Indirect Taxes as background academic context rather than a clinical decision trigger.
While not a clinical topic, understanding basic financial concepts like taxation is part of the general knowledge required for professionals, including nurses, for personal financial planning and civic awareness.
In the context of hospital administration, understanding different tax structures (like GST on medical supplies and services) is crucial for financial management and budgeting.
What if? If the question asked for a tax whose burden cannot be shifted, any of the other three options (Corporation Tax, Wealth Tax, or Income Tax) would have been correct as they are all direct taxes.

How to Approach the Question

First, identify the key term in the question: 'indirect tax'.
Recall or deduce the definition of an indirect tax: a tax on goods/services where the burden can be passed on to the consumer.
Contrast this with a direct tax: a tax on income/wealth where the burden cannot be shifted.
Examine each option:
Corporation Tax: Tax on company profits. Direct.
Wealth Tax: Tax on assets. Direct.

Concept Tested & Keywords

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Practise the full DSSSB - 28 August 2019 (Shift-1)

Attempt every question from this paper in a timed mock, then review the full solution for each one.