What term describes taxes on goods and services such as GST and VAT?

What term describes taxes on goods and services such as GST and VAT?

• A. Indirect Taxes
• B. Direct Taxes
• C. Subsidy
• D. Tax

Answer: (A)

Indirect taxes are taxes on goods and services such as GST and VAT. They’re charged as part of the price you pay when you buy something, and the seller collects the tax and passes it to the government. The economic burden tends to fall on consumers in the form of higher prices, even though the tax is collected from sellers. This distinguishes them from direct taxes, which are charged on income or wealth of individuals or firms. A subsidy is the opposite of a tax—a payment to support production or consumption—so it doesn’t describe these charges. The word tax is too broad here; the specific category for taxes on goods and services is indirect taxes.

Indirect taxes are taxes on goods and services such as GST and VAT. They’re charged as part of the price you pay when you buy something, and the seller collects the tax and passes it to the government. The economic burden tends to fall on consumers in the form of higher prices, even though the tax is collected from sellers. This distinguishes them from direct taxes, which are charged on income or wealth of individuals or firms. A subsidy is the opposite of a tax—a payment to support production or consumption—so it doesn’t describe these charges. The word tax is too broad here; the specific category for taxes on goods and services is indirect taxes.