Tariff vs Tax: Is there confusion about tax and tariff? Know the difference between the two?:

News Topical, Digital Desk : Difference between Tariff and Tax: The hefty 50 percent tariff imposed by America on India has come into effect from today. Earlier America had imposed a baseline tariff of 25 percent and then later another 25 percent tariff was imposed on the purchase of oil from Russia. This means that now up to 50 percent tariff will be levied on the import of Indian goods in America.

People are usually confused about tax and tariff because both the words are often used interchangeably. However, there is a difference between the two. The biggest difference between them is that tax is paid by an individual or a company to the government based on its income, while tariff is imposed on the import of goods.

What is taxation called?

It is a compulsory part of the income given by a company, institution or individual to the government. There are many types of taxes, which are used for schools, roads, Medicare and other basic projects. In income tax, individuals pay a part of their income to the government in the form of tax. People earning more pay more and people with lower income pay less tax. Similarly, under corporate tax, companies pay tax to the government according to their profits.

Their rates vary in different countries and states. Similarly, the tax imposed on goods at the time of sale is known as sales tax, and the tax imposed on property is known as property tax. Overall, tax is imposed on the income and purchases and sales made within the country. The government uses the money received as tax for the development of the country.

What is tariff?

The tax imposed on goods and services imported from one country to another is called tariff. That is, the tax imposed on goods imported from abroad is called tariff. Its purpose is to encourage the consumption of domestically produced goods. Since foreign goods will become expensive due to tariff, people will use the goods manufactured in the country as much as possible. There are two types of tariffs - Specific Tariff and Ad-Valorem Tariff.

In Specific Tariff, a fixed amount of tax is levied on each unit (e.g. per kg, per litre) such as Rs 10 per kg of rice.

In Ad-Valorem Tariff, tax is levied on the basis of percentage of the total price of the goods, that is, the more expensive the goods, the higher will be the tariff on them.

Of course, the purpose of tariffs is to protect our country's industries from cheap foreign goods. Apart from this, tariffs also increase the government's revenue. Apart from all this, tariffs are sometimes also used to put pressure on other countries.