Class 11 Entrepreneurship Notes · CBSE
Taxes
Taxes — understand direct and indirect taxes, see where each tax enters cost and profit calculations, and learn what entrepreneurs must know before preparing statements. CBSE Class 11 Entrepreneurship notes with income tax, GST, and customs duty examples.
Last updated: 10 Sep 2026
Notes
Tax Treatment in Sum Preparation
In every financial sum, each tax lands in one of three places — inside costs, on top of profit, or not at all (because it is recovered). Placing a tax in the wrong box changes the final answer.
| Tax | Where it goes in the sums |
|---|---|
| Income Tax / Corporation Tax | Direct tax — charged ON profit, never included in costs → explains “income before tax / after tax” |
| Property Tax | Direct tax — levied on owners of buildings + land |
| Customs Duty (on imported raw material) | Indirect tax — INCLUDED in cost of goods sold |
| Duty Drawback (export house) | Recovered — do NOT include the custom duty in cost of goods sold |
| Sales Tax/VAT, Service Tax, Central Excise | Indirect tax — can be shifted; included as a cost element in computation |
Direct vs Indirect — decide before you start
A direct tax cannot be shifted — it is levied on income, wealth or assets. An indirect tax can be shifted and may form part of cost. Before preparing any statement, decide: which taxes does the business collect on behalf of the government, which form part of cost, and which come out of profit?So what? — Your restaurant bill shows GST as a separate line (an indirect tax you pay to the government through the restaurant). The restaurant's own income tax, by contrast, is never on your bill — it comes out of the owner's profit.
Key Takeaways
Key Takeaways
- Direct taxes are charged ON profit — income tax and corporation tax are never included in costs; they explain “income before tax / after tax”.
- Property tax is direct — levied on owners of buildings and land, not shifted to customers.
- Customs duty on imported raw material is an indirect tax and is INCLUDED in cost of goods sold.
- Duty drawback means the duty is recovered — so it is NOT included in cost of goods sold.
- Sales tax/VAT, service tax and central excise can be shifted and enter sums as a cost element.
- Before preparing any statement, decide: which taxes are collected for the government, which form part of cost, and which come out of profit.
- So what? — The ₹ 18 GST on your ₹ 118 samosa bill is collected for the government; the samosa shop’s income tax is paid out of its own profit.