Telangana SCERT Class 9 Social Studies Chapter 11 Solution – The Government Budget and Taxation. Here on this post we have provided Class 9 Social Studies The Government Budget and Taxation Telangana State Board Solution. Telangana State Board English Class IX Medium Students can download this Solution to Solve out Improve Your Learning Questions and Answers.
Telangana State Board Class 9 Social Studies Chapter 11 The Government Budget and Taxation Solution:
1.) Why does the government need a budget?Why does the budget talk of taxes?
Ans: To fulfill the various roles, the government must have adequate money. The money required for the different functions of the government is collected from the people in the form of taxes. There are a variety of taxes that the government collects about which we shall study in the next sections. The taxes collected constitute the revenues of the government. Revenues are necessary to finance the expenditures of the government. The Annual Budget presented before the Parliament by the Finance Minister gives the expected expenditure by the government on its various programmes for the coming year. It also states how these expenditures are going to be met through various revenue collections. Similarly, in each state assembly, the state government presents the budget for that state.
Taxes are the main source of revenue for the government. There are a variety of taxes collected by the government. You might have heard about some of them like Goods and Service Tax (GST), income tax, property tax, customs duty etc. The taxes can broadly be classified into two categories: direct taxes and indirect taxes.
2.) What is the difference between income tax and excise duty?
Ans: Income tax is charged on personal income of individuals. There can be a variety of sources of individual incomes like wages, salaries and pensions. An individual can also earn interest income on money that is kept in banks. A person might also get rent on properties that he owns like house rent. All these are considered as incomes on which taxes have to be paid. Income tax is charged only for those who earn above a certain amount. This is charged as a percentage of the income earned. Those who earn a higher income have to pay a greater proportion of their income as tax. Excise duty was charged on the production of goods.
3.) You are expected to pay taxes on steel, matches, clocks, cloth, iron; a tax increaseon which of these would affect the prices of other commodities the most and why?
Ans: There are a number of goods and services that are not directly used by people, such as diesel, steel, aluminium, machines, trucks, truck tyres etc. Such things are used in making or transporting other things. Thus, large number of places – industries, factories and businesses where these might be used. People do not buy them directly for consumption.We saw that when tax is increased on things such as steel, diesel etc, this increase gets added to the cost of goods which are made out of them or transported with their help. With this, even the poor who buy grain or cloth have to pay some part of the tax on diesel or steel. When such things are taxed, the price of many other things goes up. Thus, we often hear people saying:
4.) Ordinary food items, such as grain, pulses, oil are used by all. Then why is it said that imposing tax on them will have a greater effect on the poor?
Ans: Taxes can be collected more easily on goods, but except for luxury items, taxing essential goods affects the poor greatly. Taxes charged and collected have a strong impact on people’s lives. The tax on income falls more heavily on the rich and therefore can be considered more fair. But the taxes from income might not be enough to cover the large government expenditure. Any budget has to take all these considerations into account. That is why the time of the budget is of great importance for everyone.
We saw that when tax is increased on things such as grain, pulses, oiletc, this increase gets added to the cost of goods which are made out of them or transported with their help. With this, even the poor who buy grain or cloth have to pay some part of the tax on diesel or steel. When such things are taxed, the price of many other things goes up. Thus, we often hear people saying:
5.) Tax on income or tax on commodities; which of the two affects the rich more andwhich affects the poor more? Explain with reasons.
Ans: Taxes can be collected more easily on goods, but except for luxury items, taxing essential goods affects the poor greatly. Taxes charged and collected have a strong impact on people’s lives. The tax on income falls more heavily on the rich and therefore can be considered more fair. But the taxes from income might not be enough to cover the large government expenditure. Any budget has to take all these considerations into account. That is why the time of the budget is of great importance for everyone.
6.) How would VAT reduce the evasion of taxes on goods?
Ans: Modern production and sale process is a complex one and may involve many stages. Even the simplest product would comprise of atleast a few stages in production and then sale. At each stage, there is some added value.Let us understand it using the following example.
A biscuit manufacturer buys his raw materials from an unbranded source. He buys materials such as wheat flour, sugar etc on which no tax is charged. Suppose he makes Rs.450 worth of biscuits, all his costs are included in this figure – raw materials, labour charges, salaries, office and factory rent etc. If he adds his profit margin of Rs. 50, the total value of the output is Rs. 500. This is his sale price. He sells the biscuits to a trader. At the time of sale, the biscuit manufacturer has to charge GST at the prescribed tax rate. If the GST rate is 5%, the biscuit manufacturer would have to pay Rs.25 as tax (5% of Rs.500) that he would charge to the trader, who buys the biscuits. This tax is collected by the biscuit manufacturer from the wholesale trader and paid or deposited with the government. The bill to the trader reads as:
Value of biscuits = Rs.500
GST = Rs.25
Total = Rs.525
For the wholesale trader the value of goods purchased is Rs 500. The trader stocks the goods, maintains a shop and hires staff to do the work. She sells these biscuits to a retail store at Rs 600. This value of goods sold includes all her costs and profit margin. Rs. 600 may be considered the value of her output. At 5% GST rate she has to charge Rs.30 as GST when she sells. Therefore her bill for the retailer would read as:
Value of biscuits = Rs.600
GST = Rs.30
Total price for retailer = Rs.630
7.) What is the difference between Excise duty and Customs duty?
Ans: Excise duty is a type of tax charged or imposed on goods and services that are produced or performed within a country. It is given by the producer of the product. Examples: alcohol, medicine, etc.
Customs duty id the type of tax that is charged on goods or products that are imported from other countries. It is basically imposed on products from across the borders of the county. It is calculated on the value of the goods being imported.
8.) What are the possible reasons for like in the bus fares?
Ans: a) Costs of expenses and employment wages have increased.
b) Petrol and diesel prices have seen a significant increase.
c) Changes in certain policies of the government, especially taxation issues related to public transport.
d) Costs involved in constant fixing and repairing of the infrastructure of the bus.
e) Decrease in the subsidy provided to the bus owners by the government.
9.) Read the paragraph under the heading ‘Direct Taxes’ (Income Tax is charged only for …) and answer the following:
Why do high income earners pay more tax?
Ans: Income tax is imposed on the personal earnings of individuals, encompassing various sources such as wages, salaries, and pensions. Additionally, individuals can accrue interest income from bank deposits and rental income from properties they own, such as housing rentals. All these forms of income are subject to taxation. However, income tax is applicable only to those individuals whose earnings exceed a specific threshold. The tax amount is calculated based on a percentage of the income earned. Individuals with higher incomes are obligated to contribute a larger portion of their earnings as tax.
10.) What is the effect of black money on our economy?
Ans: Even this small percentage of people from a large population implies that tax has to be collected from a sizable number of people. For example, in the incomes of around 280 lakhs of individual were assessed for income tax. They would be living in different places in the country. Collecting income tax is not easy. There are many hurdles. Many people do not disclose their entire income or show it to be less than what it actually is. This income, which is kept hidden, is known as black money. Many factory owners, rich moneylenders, traders, those doing private business can easily show a low income. It is easy to calculate the income of those who are paid monthly salaries. Tax on their income is directly deducted at the source from where they get their salaries. But many salaried persons also have other sources of income which they keep hidden. Such people, whether they are workers, officers, ministers or clerks, often do not disclose their income correctly. Because there is no tax on income from agriculture many wrongly show their income as income from land and therefore, evade tax. Thus, there are many ‘tax evaders’ and the black money, that is the money on which tax should have been paid but wasn’t, goes on accumulating. To get hold of this hoard of black money, the income tax department raids many people’s houses and offices. It has also tried to make the procedures more convenient for people to pay their own tax. Despite these efforts, a large number of people do not pay income tax or pay less than they should.