In IAS preparation, the IAS aspirants have to study the every aspect of the important issues and topics. GST is one of such important topics, on which there is a greater chance of asking questions in IAS Prelims Exam.
Here, we have provided Indian Economy IAS questions based on the topic- Goods and Services Tax for IAS Prelims Exam.
Indian Economy IAS Questions- Tax structure in India
1. Consider the following statements regarding the Goods and Service Tax in India:
I. The Goods and Services Tax (GST) is a proposal of tax in India which will emerge after merging many of the state and central level indirect taxes.
II. It will be a tax collected on the VAT method—having all the benefits of a VAT kind of tax.
III. It will be imposed all over the country with the uniformity of rate and will replace multiple Central and state taxes (a single VAT it will be known).
Which of the following statement(s) is/are correct?
a. Only I
b. I and II
c. II and III
d. All of the above
Answer: d
Explanation:
The Goods and Services Tax (GST) is a proposal18 of tax in India which will emerge after merging many of the state and central level indirect taxes. Important points of the proposed GST are as follows:
(i) It will be a tax collected on the VAT method—having all the benefits of a VAT kind of tax.
(ii) It will be imposed all over the country with the uniformity of rate and will replace multiple central and state taxes (a single VAT it will be known). The taxes to be withdrawn or merged into the GST are—
Central Taxes: CENVAT, service tax, sales tax and stamp duty.
State Taxes: State excise, sales tax, entry tax, lease tax, works contract tax, luxury tax, octroi, turnover tax and cess.
(iii) The proposed tax has a single rate of 20 per cent of which centre and state will have a share of 12 per cent and 8 per cent, respectively.
2. Which of the following benefits of GST is not true regarding the business and industry in India?
a. All tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.
b. A system of seamless tax-credits throughout the value-chain, and across boundaries of States but GST would not ensure the cascading of taxes.
c. GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.
d. Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.
Answer: b
Explanation:
The benefits of GST business and industry are as follows:
• Easy compliance: A robust and comprehensive IT system would be the foundation of the GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. would be available to the taxpayers online, which would make compliance easy and transparent.
• Uniformity of tax rates and structures: GST will ensure that indirect tax rates and structures are common across the country, thereby increasing certainty and ease of doing business. In other words, GST would make doing business in the country tax neutral, irrespective of the choice of place of doing business.
• Removal of cascading: A system of seamless tax-credits throughout the value-chain, and across boundaries of States, would ensure that there is minimal cascading of taxes. This would reduce hidden costs of doing business.
• Improved competitiveness: Reduction in transaction costs of doing business would eventually lead to an improved competitiveness for the trade and industry.
• Gain to manufacturers and exporters: The subsuming of major Central and State taxes in GST, complete and comprehensive set-off of input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian exports. The uniformity in tax rates and procedures across the country will also go a long way in reducing the compliance cost.
Current Affairs Quizzes for IAS Prelims 2017- February 2017
3. Which of the following is true regarding the benefits of GST for both the level of government i.e. the Central Government and the State Governments?
I. Simple and easy to administer
II. Better controls on leakage
III. Higher revenue efficiency
IV. Relief in overall tax burden on governments
Codes:
a. I, II and III
b. I and II
c. II and III
d. All of the above
Answer: a
Explanation:
Benefits of GST for Central and State Governments are as follows:
• Simple and easy to administer: Multiple indirect taxes at the Central and State levels are being replaced by GST. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State levied so far.
• Better controls on leakage: GST will result in better tax compliance due to a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.
• Higher revenue efficiency: GST is expected to decrease the cost of collection of tax revenues of the Government, and will therefore, lead to higher revenue efficiency.
4. Which of the following Central level taxes being subsumed into GST?
a. Octroi and Entry tax
b. Service Tax
c. Purchase Tax,
d. All of the above
Answer: b
Explanation:
Only the service Tax is belongs to tax at the central level while two other are the taxes at the state level. At the Central level, the following taxes are being subsumed into GST:
(i) Central Excise Duty,
(ii) Additional Excise Duty,
(iii) Service Tax,
(iv) Additional Customs Duty commonly known as Countervailing Duty, and
(v) Special Additional Duty of Customs.
Complete study material of ECONOMIC SURVEY 2016-17
5. Which of the following State level taxes being subsumed into GST?
a. Subsuming of State Value Added Tax/Sales Tax
b. Entertainment Tax
c. Luxury tax
d. All of the above
Answer: d
Explanation:
At the State level, the following taxes are being subsumed into GST:
(i) Subsuming of State Value Added Tax/Sales Tax,
(ii) Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States),
(iii) Octroi and Entry tax,
(iv) Purchase Tax,
(v) Luxury tax, and
(vi) Taxes on lottery, betting and gambling
6. Impetus to direct tax reforms in India came with the recommendations of the Task Force on Direct & Indirect Taxes under the chairmanship of:
a. Vijay Kelkar
b. Suresh Tendulkar
c. Abhijit Sen
d. Abid Hussain
Answer: a
Explanation:
GST is being introduced in the country after a 13 year long journey since it was first discussed in the report of the Kelkar Task Force on indirect taxes. In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.
The main recommendations of this task force related to the direct taxes related to increasing the income tax exemption limit, rationalization of exemptions, abolition of long term capital gains tax, abolition of wealth tax etc.
Union Budget 2017 Questions for IAS Exam
7. A proposal to introduce a National level Goods and Services Tax (GST) by:
a. 1st April, 2008
b. 1st April, 2009
c. 1st April, 2010
d. 1st April, 2011
Answer: c
Explanation:
GST is being introduced in the country after a 13 year long journey since it was first discussed in the report of the Kelkar Task Force on indirect taxes. Some of the major milestones on the proposal for introduction of GST in India is as follows:
a. In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods and Services Tax (GST) based on VAT principle.
b. A proposal to introduce a National level Goods and Services Tax (GST) by April 1, 2010 was first mooted in the Budget Speech for the financial year 2006-07.
c. Since the proposal involved reform/ restructuring of not only indirect taxes levied by the Centre but also the States, the responsibility of preparing a Design and Road Map for the implementation of GST was assigned to the Empowered Committee of State Finance Ministers (EC).
d. Based on inputs from Govt of India and States, the EC released its First Discussion Paper on Goods and Services Tax in India in November, 2009.
e. In order to take the GST related work further, a Joint Working Group consisting of officers from Central as well as State Government was constituted in September, 2009.
8. GST will be administered as a “single taxation” system in India. Consider the following statements regarding this:
I. Keeping in mind the federal structure of India, there will be only one components of GST i.e. Central GST (CGST).
II. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State.
Which of the following statement(s) is/are correct?
a. Only I
b. Only II
c. Both I and II
d. Neither I nor II
Answer: a
Explanation:
Keeping in mind the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will simultaneously levy GST across the value chain.
Tax will be levied on every supply of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted.
Current Affairs Quizzes for IAS Prelims 2017- January 2017
9. In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. Consider the following statements regarding the Integrated Goods and Services Tax (IGST) under GST:
I. The IGST would roughly be equal to CGST (centre) plus SGST (state).
II. The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order).
Which of the following statement(s) is/are correct?
a. Only I
b. Only II
c. Both I and II
d. Neither I nor II
Answer: c
Explanation:
In case of inter-State transactions, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services under Article 269A (1) of the Constitution. The IGST would roughly be equal to CGST plus SGST. The IGST mechanism has been designed to ensure seamless flow of input tax credit from one State to another.
The inter-State seller would pay IGST on the sale of his goods to the Central Government after adjusting credit of IGST, CGST and SGST on his purchases (in that order). The exporting State will transfer to the Centre the credit of SGST used in payment of IGST. The importing dealer will claim credit of IGST while discharging his output tax liability (both CGST and SGST) in his own State. The Centre will transfer to the importing State the credit of IGST used in payment of SGST. Since GST is a destination-based tax, all SGST on the final product will ordinarily accrue to the consuming State.
10. For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. Consider the following statements regarding the objectives of GSTN:
I. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT governments.
II. GSTN is working on developing a state-of-the-art comprehensive IT infrastructure including the common GST portal providing frontend services of registration, returns and payments to all taxpayers, as well as the backend IT modules.
III. All States, accounting authorities, RBI and banks, are also preparing their IT infrastructure for the administration of GST.
Which of the following statement(s) is/are correct?
a. Only I
b. I and II
c. II and III
d. All of the above
Answer: d
Explanation:
For the implementation of GST in the country, the Central and State Governments have jointly registered Goods and Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders. The key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared infrastructure and services to Central and State/UT governments.
GSTN is working on developing a state-of-the-art comprehensive IT infrastructure including the common GST portal providing frontend services of registration, returns and payments to all taxpayers, as well as the backend IT modules for certain States that include processing of returns, registrations, audits, assessments, appeals, etc. All States, accounting authorities, RBI and banks, are also preparing their IT infrastructure for the administration of GST.
There would no manual filing of returns. All taxes can also be paid online. All mis-matched returns would be auto-generated, and there would be no need for manual interventions. Most returns would be self-assessed.