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Science & Technology·Easy

Introduction of GST is said to have increased tax buoyancy in India. Which of the following statements best explains/explain the term ‘tax buoyancy’?

Introduction of GST is said to have increased tax buoyancy in India. Which of the following statements best explains/explain the term ‘tax buoyancy’?

Options

  1. a.

    It means that for every rupee of tax paid, a proportionate growth in GDP is seen.

  2. b.

    It means that any increase in growth results in proportionate increase in tax revenue.

    Correct answer
  3. c.

    It means that increase in the number of people in higher tax bracket will result in more number of people in lower tax bracket.

  4. d.

    Both (A) and (B)

Explanation

• Tax buoyancy refers to the responsiveness of tax revenue growth to changes in GDP. A tax is said to be buoyant, if its revenue increases with an increase in growth in the economy, without increasing the tax rate.

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