Who is actually paying the tax to the government? by Mr Lancer D'Souza

The following chart is from the previous article. Did you miss the previous article?

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	(A)	(B)	(C)	(D)	Total
	Price	Price without tax	Value added	10% Tax
Calculation -		[A-Previous Tax ‘D’]		B+C*10%	(B+C+D)
Manufacturer			100	10(100*10%=10)	110 (100+10)
Wholesaler	110	100(110-10)	40	14(140*10)	154(100+40+14)
Retailer	154	140(154-14)	30	17(170*10%)	187(154+30)

[Tax Paid by Manufacturer is Rs 10, tax paid by wholesaler is Rs 4 (14-10) and the tax paid by retailer is Rs 3 (17-14).]

From the above we observe that the manufacturer collects the tax from wholesaler of Rs 10 and pays to the government. So, the tax contribution from the manufacturer is zero. 

The wholesaler sells the same product to retailer and collects the sum of Rs. 14 (tax) from retailer. From the collected tax, he splits the amount, Rs 10 which is already paid to the Manufacturer and then pays the balance of Rs 4 to the government. Here the tax contribution from wholesaler is zero. (The tax of Rs. 14 is collected from the retailer.)

Now the retailer sells the product to the consumer and collects the sum of Rs. 17 (tax).  Rs. 14 is paid to the wholesaler and then pays the balance of Rs 3 to the government. Here also the tax contribution from the retailer is zero.

From the above example, do you know who actually paid the tax?

Who	Tax Paid	Collected from	Tax contribution to govt
Manufacturer	10	Wholesaler of Rs 10	0
Wholesaler	14 (10+4)	Retailer of Rs 14	0
Retailer	17 (14+3)	Consumer of Rs 17	0
Consumer	17	????	17

Tax Rs 10:

Manufacturer pays Rs.10 to government, collects the same from wholesaler.

Tax Rs 14=10+4:

Wholesaler pays Rs.10 to Manufacturer and Rs.4 to the government, collects the amount of Rs 14 from retailer.

Tax Rs 17=14+3:

Retailer pays Rs.14 to Wholesaler and Rs 3 to the government, collects the amount of Rs 17 from consumer.

Finally, who has paid the tax??? 

It’s the customer! 

Yes, that’s right. The entire burden of tax is on customer. The totally amount of Rs 17.00 (only tax) is paid by the customer.

Not directly but through Manufacturer (Rs.10), the wholesaler (Rs.4) and the retailer (Rs.3). 

Conclusion:

Customer is the person who always pays the tax to government. Companies or any other organization do not pay tax other than Income tax, that is which is paid from their profit.

Once the wise man said, "For rich put in what they had to spare of their riches; but poor, put in what they had to live on.”

Thanks for reading!

E&OE

P.S: If you find any errors or inaccuracies in this article, please bring to my notice. You can reach out to me at:

lancer@lancerdsouza.com

lancerdsouza@yahoo.com