SSC Selection Post 2025 PYQ — Question 6

Correct Answer

Goods and Services Tax (GST)

Explanation

The primary tax classified as an indirect tax among the choices is the Goods and Services Tax (GST). Taxes are systematically categorized based on the method used for collection and their economic incidence, meaning whether the tax burden can be shifted to another person or must be paid directly by the individual or entity being taxed. An indirect tax is a tax levied on goods and services rather than on income, profits, or wealth, and its burden is passed on to the final consumer.

The overarching goal of the traditional taxation system is to group levies into two major categories: Direct Taxes and Indirect Taxes. Income Tax, Corporate Tax, and Wealth Tax belong to the direct tax category because they are directly levied on individuals or corporations, and the burden cannot be shifted to anyone else. In contrast, when a consumer purchases a product or a service, GST is included in the final price, meaning the supplier collects it from the consumer and remits it to the government, making it an indirect collection method.

Key Points

An indirect tax operates as a consumption-based tax where the consumer's purchasing behavior serves as the primary source of tax generation, placing it firmly in the indirect tax class along with other duties like Customs Duty and Excise Duty. In contrast, Income Tax and Corporate Tax are direct taxes because their economic foundation originates from personal or corporate earnings. Wealth Tax also functions as a direct tax since it is calculated directly on the net wealth owned by an individual.

Important Questions and Answers

Question: Which major comprehensive indirect tax replaced multiple cascading indirect taxes in India on July 1, 2017?

Answer: Goods and Services Tax (GST).

Question: To which traditional category of taxation do taxes levied directly on individual salary or corporate profits belong?

Answer: Direct Tax.