Public Finance and Budget — Practice Quiz

Direct Tax

Income tax is a direct tax because it is paid directly by the person on whom it is imposed and cannot be transferred to others. Direct taxes are levied on individuals and organizations based on their income or wealth. The burden of direct tax stays with the taxpayer. Other examples include corporate tax and wealth tax. Indirect taxes, on the other hand, can be transferred from one person to another, like GST where the manufacturer passes the tax burden to consumers through higher prices.

Goods and Services Tax

GST stands for Goods and Services Tax. It is an indirect tax imposed on the supply of goods and services in India. GST replaced multiple indirect taxes and created a unified tax system. It is collected at each stage of production and distribution, but the burden ultimately falls on the final consumer. GST has simplified the tax structure and reduced tax complexity. It covers most goods and services, making it a comprehensive indirect tax system that helps increase government revenue efficiently.

Planned expenditure is for development, non-planned is for administration

Planned expenditure refers to government spending on developmental activities and nation-building exercises under various development plans. It includes spending on agriculture, industry, education, health, and infrastructure projects. Non-planned expenditure covers routine administrative costs, defense, interest payments, and maintenance expenses. Planned expenditure aims at economic growth and social welfare, while non-planned expenditure ensures the basic functioning of government. Both are necessary, but planned expenditure directly contributes to long-term development goals.

Profits from public sector enterprises

Profits from public sector enterprises are non-tax revenue because they come from business operations, not from taxation. Non-tax revenue includes profits from Railways, Post and Telecommunications, public sector industries, and Reserve Bank of India. These are earnings from government-owned businesses and services. Tax revenue comes from direct and indirect taxes imposed on citizens and businesses. Non-tax revenue is important as it reduces the government's dependence on taxation and provides additional funds for public expenditure.