What is Single Point Tax?
Single Point taxation means imposition of tax at only one point between the production and the sale of goods to ultimate consumers. The tax is levied at only one point between the point of production (first point) and the point of ultimate sale to consumption (final point).
At the first point, sales tax for example is levied, when the sale of commodity takes place for the first time in the territorial limit of the concerned State. At the final point, the tax is imposed at the last stage of sale to the consumers. Thus, a single point tax is levied either at the first stage or at the final stage.
What is Multi-Point Tax?
Multi-point taxation means that the tax is levied at all stages of sale of the commodity. Tax is levied and collected whenever goods are sold at every point of sale.
Difference between Single Point Tax and Multi-point Tax
The following are some of the differences between single point tax and multi-point tax.
1. Facility of Collection: Single point tax is easy to enforce and collect, but multi-point tax is difficult to enforce and collect because of number of points at which it is collected.
2. Payment of Tax on Tax: Under single point tax system, tax is paid on the price of the product, which does not include tax as one of its component. Hence, the payment of tax on tax is not occurred, whereas in multi-point tax system in each subsequent point, tax is paid on the price which includes the tax paid at the proceeding points also. Thus, the payment of tax on tax is occurred.
3. Point of Levy: Under single point tax system, the tax is levied at only one point either at the first point or at the final point, whereas under multi-point tax system, the tax is levied at all points of sale till it is sold to the consumers.
4. Capital Requirements: In single point sales tax system, the capital requirements are low. But in multi-point sales tax, the manufacturer or dealer of every stage is required to raise capital not only for the actual cost of manufacture or purchase but also for payment of tax. As a result, interest on such additional capital also becomes a part of the cost at this point and which has a further rise in price. Hence, the capital requirement under this system is high.
5. Price for the Consumer: Under single point tax, the price paid by the consumer is less than the price paid under multi-point tax system. The price paid by the consumer under multi-point sales lax includes cost of the products and tax paid by the previous sellers. The price paid by the consumer under multi-point sales tax is more than price paid under single point tax.
6. Quantum of Revenue: From the revenue point of view, single point system generates less amount of revenue when comparing with multi-point tax system. In multi-point tax system, more revenue can be raised than that of the single point tax system.
7. Chance for Tax Evasion: Under single point tax system, the possibility for tax evasion is more, whereas under Multi-point tax system, it is difficult to evade tax.
8. Rate of Tax: Usually, under single point tax system, the rate of tax is high, whereas in the case of multi-point tax system, the rates of taxes are low.
9. Administration: The number of dealers to be assessed under single point tax is very small. Hence, it is convenient to administer this system. But the administration of multi-point tax is difficult because large number of dealers is to be dealt with.
10. Exemption: The number of goods exempted under single point tax is more. But the number of goods exempted under multi-point tax is less.