✅ 1. Specific Tax
📌 Meaning:
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A fixed amount of tax is charged per unit of a good or service.
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Tax amount does not depend on the price of the product.
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Collected based on quantity, weight, size, etc.
📖 Example:
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Tax on petrol: ₹5 per litre
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Whether the petrol price is ₹80 or ₹100 per litre, the tax remains ₹5 per litre.
✅ Easy to remember: Specific = Fixed per unit
✅ 2. Ad-Valorem Tax
📌 Meaning:
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Tax is charged as a percentage of the value (price) of the good or service.
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Higher the price → Higher the tax, Lower the price → Lower the tax
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Based on the value of the product, not quantity.
📖 Example:
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GST on gold: 3% of the gold price
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If gold price = ₹50,000 → Tax = ₹1,500
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If gold price = ₹60,000 → Tax = ₹1,800
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Tax changes based on the value.
✅ Easy to remember: Ad-Valorem = "According to Value"
✅ Quick Comparison Table:
| Type of Tax | Based on | Example | Effect |
|---|---|---|---|
| Specific Tax | Quantity, Size, Weight | ₹5 per litre petrol | Same tax, price doesn't matter |
| Ad-Valorem Tax | Value (price) | 3% GST on gold value | Tax changes if price changes |