Which of the following is known as the Paper tax in India?
I. Wealth tax
II. Goods and Services tax
Show answer & explanation
Correct answer: A
Explanation
Paper Tax -
Wealth tax in India is known as a 'paper tax'.
It is called a paper tax because the actual revenue generated by it was very low, but the paperwork involved in implementing and calculating it was very complex and lengthy.
History: The Wealth Tax Act was enacted in India in 1957.
Given its administrative complexities and low collections, the then Finance Minister Arun Jaitley abolished it in Budget 2015-16. In its place, a 'surcharge' was increased on wealthy individuals.
Analysis of Alternatives:
Wealth Tax: This was a direct tax levied on the net value of an individual's total assets. This is what is called a 'paper tax'.
Goods and Services Tax (GST): This is an indirect tax that replaced several older taxes in India (such as VAT, excise duty). It is not called a 'paper tax' because it is a comprehensive and consumption-based tax system.