How direct tax has limited reach where indirect taxes has a wide scope
Dear student,
Direct taxes have a limited reach because a large number of people remain out of the purview of such taxes. For instance, income tax is one the important examples of direct tax. A large section of population in India remain below the minimum income slab for taxation, hence, remain outside the taxation.
On the other hand, indirect taxation is linked to the consumption expenditure of the individuals. Such taxes have a greater purview. For example, sales tax is linked to the purchase of goods and services by the individuals.
Direct taxes have a limited reach because a large number of people remain out of the purview of such taxes. For instance, income tax is one the important examples of direct tax. A large section of population in India remain below the minimum income slab for taxation, hence, remain outside the taxation.
On the other hand, indirect taxation is linked to the consumption expenditure of the individuals. Such taxes have a greater purview. For example, sales tax is linked to the purchase of goods and services by the individuals.