Question

Read the passage below and answer the questions that follow.

Over the last two years, fiscal policy has remained a significant tool for addressing the economic fallout of pandemic. The revenue receipts of the central government have shown a large increase during 2011-2012. Tax collections of both direct and indirect taxes have contributed to the increase in the revenue pool. Personal taxes and corporate taxes have registered a large increase. The monthly GST collections have crossed the 1 lakh crore mark. The revenue from excise duties has also increased non-tax revenue has also contributed to the increase in revenue of the government. The expenditure policy of the central government during 2021-22 has a strong emphasis on capital expenditure focus on infrastructure like roads, railways and housing.

1. What do you understand by fiscal policy?   [1]
2. Differentiate between direct taxes and indirect taxes.   [2]
3. What is GST?   [1]
4. What do you mean by capital expenditure?   [1]
5. Give two examples of non-tax revenue.   [2]
6. Define fiscal deficit.   [1]

Answer 1

1. Fiscal policy is described as the policy by which the government employs taxation, public spending, and public borrowing to achieve various economic policy goals, such as economic growth, economic stability, price stability, and so on.
2. 
   

   Sr. No.	Basis	Direct Taxes	Indirect Taxes
   1.	Definition	Individuals and organisations pay taxes directly to the government.	Sellers collect taxes from consumers and then pay them to the government.
   2.	Burden	Cannot be shifted; the person on whom it is imposed bears the weight.	Can be shifted and passed on to the eventual consumer.
   3.	Examples	Income Tax, Corporate Tax	GST, Excise Duty, Customs Duty

3. GST is Goods and Services Tax. India's indirect tax on goods and services is comprehensive. GST replaced indirect taxes like VAT, service tax, and excise duty. It is collected throughout production but paid for by consumers.
4. Capital expenditures, on the other hand, are government expenditures that result in the creation of physical and financial assets or the reduction of financial liabilities, such as spending on land, buildings, machinery, equipment, and loans and advances made to state governments.
5. Two examples of non-tax revenue are:
   1. Dividends and profits
   2. Fees and fines
6. Fiscal deficit is the excess of total expenditure of the government over its revenue and capital receipts excluding borrowings.