The GST (Goods and Services Tax) is a consumption-based tax, which is levied on the supply of goods and services. It is considered a hybrid tax as it has elements of both regressive and progressive taxes.
A regressive tax is one where the tax rate decreases as the income of the taxpayer increases. In other words, the tax burden falls disproportionately on low-income earners. In the case of GST, the tax rate is the same for all taxpayers, irrespective of their income level. This means that the tax burden falls disproportionately on low-income earners, making it a regressive tax.
On the other hand, a progressive tax is one where the tax rate increases as the income of the taxpayer increases. This means that the tax burden falls more heavily on high-income earners. While GST does not have a progressive tax structure, the input tax credit mechanism ensures that the tax burden is not entirely regressive. Businesses can claim a credit for the GST they have paid on their purchases, which helps to reduce the effective tax burden.
Overall, the GST can be considered a hybrid tax as it has both regressive and progressive elements. While it may be regressive in its basic structure, the input tax credit mechanism ensures that it is not entirely regressive. Additionally, the GST is expected to boost the economy by reducing the cascading effect of taxes and promoting efficiency, which can ultimately benefit all taxpayers, regardless of their income level.
While GST is generally considered to be a regressive tax, it does have some progressive elements. One of the key features of GST is the input tax credit mechanism, which allows businesses to claim a credit for the GST they have paid on their purchases. This means
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