Consumption Tax

The tax paid by an individual for using any goods or service is known as Consumption Tax. The person who pays this tax is eligible for certain deductions and exemptions. Hence, if you have a low consumption power, you will not have to pay this tax.

What is Consumption Tax?

Consumption tax is a tax we pay for using goods and services. It is deducted on the money spent on consumption. It is a kind of indirect tax like sales tax or value added tax. Consumption tax is also known as cash-flow tax, expenditure tax or even consumed income tax.

Consumption tax can be rather regressive in nature, like other sales taxes. Using methods of exemptions, deductions, graduated rates, tax rebates etc will make this kind of tax less regressive in nature. The tax exemptions and deductions accumulated will in turn reduce the taxpayer's burden; and also will be a form of saving when it comes to your taxes. This is a tax for the expenses made by you, while income tax is a tax you pay on the income earned by you.