Question

In what type of tax, shifting of the tax burden is possible? Explain using an example.

Answer 1

The shifting of the tax burden is possible in an indirect tax. In an indirect tax, the person who pays the tax to the government can shift the cost to another person, usually the final consumer, by including the tax into the selling price of products or services.

Example: A shopkeeper pays GST to the government but recovers it from customers by adding it to the price of the product. Thus, the ultimate burden of the tax falls on the consumer.