CMA Intermediate · Direct and Indirect Taxation · Concept of Indirect Taxes
Indirect taxes are commonly classified as specific or ad valorem. A duty of Rs 12 per kilogram on a commodity is an example of which type, and what is the duty on 500 kg?
A duty fixed per unit of weight or quantity is a specific duty, not an ad valorem duty. At Rs 12 per kilogram, 500 kg attracts 500 x 12 = Rs 6,000 of duty, irrespective of the value of the goods.
- AAd valorem duty; Rs 6,000
- BSpecific duty; Rs 6,000Correct
- CSpecific duty; Rs 600
- DAd valorem duty; Rs 600
Explanation
A duty fixed per unit of quantity, regardless of value, is a specific duty. Duty = 500 kg x Rs 12 = Rs 6,000. Ad valorem duty is a percentage of value, so options A and D mislabel it, and Rs 600 results from a decimal error.
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