What does consumption tax mean?

A consumption tax is a type of tax imposed on the purchase of goods and services. It is typically levied at the point of sale, where consumers pay the tax as part of the transaction. This tax can take various forms, such as sales tax or value-added tax (VAT), and is usually calculated as a percentage of the sale price. The primary purpose of a consumption tax is to generate revenue for governments while encouraging savings and investment by taxing spending instead of income.