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Consider the following statements about Securities Transaction Tax (STT)
1. The point of incidence and impact of STT is not same.
2. Government securities are exempted from STT.
2. Government securities are exempted from STT.
Q. Which of the statements given above is/are correct ?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'B'. Can you explain this answer?
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Verified Answer
Consider the following statements about Securities Transaction Tax (ST...
The first statement might look a bit complicated to understand. But essential what it is saying is that STT is an indirect tax, which is incorrect as STT is a direct tax. An indirect tax is whose point of incidence (i.e where it is applied) and impact (those who are affected by it) is not same, like VAT. In VAT, it seems that producers, wholesalers, retailers are paying the tax, but actually its the consumer who in getting impacted. But in case of direct tax both point of incidence and impact is same, like income tax, STT etc.
Most Upvoted Answer
Consider the following statements about Securities Transaction Tax (ST...
Statement 1: The point of incidence and impact of STT is not same.
The point of incidence refers to the person or entity on whom the tax is legally imposed, while the impact refers to the person or entity who ultimately bears the economic burden of the tax. In the case of Securities Transaction Tax (STT), the point of incidence is on the buyer or seller of securities, depending on the type of transaction. However, the impact of STT is not limited to the buyer or seller alone. The burden of the tax can be passed on to other market participants such as investors, brokers, or even the general public in the form of higher transaction costs or reduced returns. Therefore, statement 1 is correct.
Statement 2: Government securities are exempted from STT.
Government securities are debt instruments issued by the government to borrow money from the market. These securities include treasury bills, bonds, and other similar instruments. In the case of STT, government securities are indeed exempted from the tax. This exemption is provided to encourage investment in government securities as they are considered safe and secure investments. By exempting government securities from STT, the government aims to lower the cost of borrowing for the government and make these securities more attractive to investors. Therefore, statement 2 is correct.
Conclusion:
Both statement 1 and statement 2 are correct. The point of incidence and impact of STT are not the same, and government securities are exempted from STT.
The point of incidence refers to the person or entity on whom the tax is legally imposed, while the impact refers to the person or entity who ultimately bears the economic burden of the tax. In the case of Securities Transaction Tax (STT), the point of incidence is on the buyer or seller of securities, depending on the type of transaction. However, the impact of STT is not limited to the buyer or seller alone. The burden of the tax can be passed on to other market participants such as investors, brokers, or even the general public in the form of higher transaction costs or reduced returns. Therefore, statement 1 is correct.
Statement 2: Government securities are exempted from STT.
Government securities are debt instruments issued by the government to borrow money from the market. These securities include treasury bills, bonds, and other similar instruments. In the case of STT, government securities are indeed exempted from the tax. This exemption is provided to encourage investment in government securities as they are considered safe and secure investments. By exempting government securities from STT, the government aims to lower the cost of borrowing for the government and make these securities more attractive to investors. Therefore, statement 2 is correct.
Conclusion:
Both statement 1 and statement 2 are correct. The point of incidence and impact of STT are not the same, and government securities are exempted from STT.
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Consider the following statements about Securities Transaction Tax (STT)1. The point of incidence and impact of STT is not same.2. Government securities are exempted from STT.Q. Which of the statements given above is/are correct ?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer?
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Consider the following statements about Securities Transaction Tax (STT)1. The point of incidence and impact of STT is not same.2. Government securities are exempted from STT.Q. Which of the statements given above is/are correct ?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements about Securities Transaction Tax (STT)1. The point of incidence and impact of STT is not same.2. Government securities are exempted from STT.Q. Which of the statements given above is/are correct ?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements about Securities Transaction Tax (STT)1. The point of incidence and impact of STT is not same.2. Government securities are exempted from STT.Q. Which of the statements given above is/are correct ?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer?.
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