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Indirect tax - class-XI

Description: indirect tax
Number of Questions: 30
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Tags: economics indirect tax public expenditure and public revenue goods and services tax commerce business studies internal trade government and taxes
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The first committee to design GST model was headed by _____.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Vijay Kelkar

  2. Asim Das Gupta

  3. Dr. Chidambaram

  4. None of the above

Show answer
Correct Option: C
Explanation:

On February 28, 2006, GST appears in the Budget speech for the first time; Finance Minister P Chidambaram sets an ambitious April 1, 2010 as deadline for GST implementation. He said the Empowered Committee of finance ministers will prepare a road map for GST.

With the introduction of GST, imports will be ______.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. more expensive

  2. cheaper

  3. neutral with no change

  4. None of the above

Show answer
Correct Option: A
Explanation:

With the introduction of GST, imports will be more expensive. The high tax  rates on imports increased the total cost of imported products.

GST is applicable to all dealers with a turnover of over ______.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Rs. 10 lakh

  2. Rs. 20 lakh

  3. Rs. 40 lakh

  4. Rs. 50 lakh

Show answer
Correct Option: B
Explanation:

A business whose aggregate turnover in a financial year exceeds Rs 20 lakhs has to mandatorily register under Goods and Services Tax. This limit is set at Rs 10 lakhs for North Eastern and hilly states flagged as special category states. 

GST is ______________.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. a value added tax

  2. tax on goods and services

  3. tax on consumer goods and services

  4. none of the above

Show answer
Correct Option: A
Explanation:

Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. Goods and Service Tax (GST) is an indirect tax levied on the supply of goods and services. This law has replaced many indirect tax laws that previously existed in India. GST is one indirect tax for the entire country.

The advantages of GST to the Citizens are listed as:

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Reduction in prices of goods and services due to elimination of cascading.

  2. Uniform prices throughout the country.

  3. Transparency in taxation system.

  4. All of the above

Show answer
Correct Option: D
Explanation:
  1. GST is a simplified transparent tax and has abolished a number of indirect taxes which was levied by the Centre and State Governments, including Central Excise duty, Service Tax, VAT, Purchase Tax, Central Sales Tax, Entry Tax, Local Body Taxes, Luxury Tax, etc.
  2. It focuses on removing the Cascading Effect, i.e. tax on tax.
  3. It has led to falling prices of many consumer goods as manufacturing cost of many good has reduced due to less burden of taxes.
  4. Items like a car, FMCG etc. are expected to become cheaper than before.
  5. As a simple rule of economics, with fall in prices of the items, there will be an increase in the demand or consumption of goods.
  6. This increase in demand will tend to increase the supply. Hence, will ultimately lead to the rise in production of goods.
  7. In the long run, it will be helpful for the common man, as increased production of goods will create more job opportunities.
  8. This will help in lowering the burden on the common man i.e. you will have to shed less money to buy the same products which were earlier costly.

The Service Tax which stood at 15% in the previous regime, has now been replaced with GST at 18%. 

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

The service tax stood at 15% before the introduction of GST. Now it stands at 18% after the implementatio n of the new GST.

GST helps in _______.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. increasing productivity

  2. increasing Tax to GDP Ratio and revenue surplus

  3. increasing Compliance

  4. all of the above

Show answer
Correct Option: D
Explanation:

GST helps in increasing productivity, compliance as well as Tax to GDP Ratio and revenue surplus of the country. It is designed in such as way so as to benefit one and all.

After the implementation of GST, many services of ______ have become costlier.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. telecom

  2. airline

  3. banking

  4. all of the above

Show answer
Correct Option: D
Explanation:

After implementation of GST, telecom, airline and banking have become a lot more costlier. This is because of the increase in the service charges.

GST minimizes the the tax impact on inflation.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. True

  2. False

Show answer
Correct Option: A
Explanation:
India implemented GST in July 2017. The inflation cycle turned from July 2017 and annual growth in CPI reached a 17-month high of 5.21% in December 2017. It has continued to hover above the 4% mark in the subsequent period. Purely based on numbers, GST seems to have had an inflationary impact on India.

There are two ways in which GST could have caused a spike in inflation: by raising the rate of tax on goods and services, and bringing within its coverage business activities outside the tax net earlier. The latter would push up inflation as any tax incidence on such businesses is bound to be passed on to consumers in terms of higher prices. In a country like India, with a huge informal sector, successful implementation of GST may have brought a lot of non-tax paying firms and transactions under the tax net.

Identify the objective(s) of implementing GST.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Reducing economic distortions

  2. Consumption based tax instead of Manufacturing

  3. Subsume all indirect taxes at Centre and State Level under

  4. All of the above

Show answer
Correct Option: D
Explanation:
Objectives of implementing GST are:
  • One Country – One Tax
  • Consumption based tax instead of Manufacturing
  • Uniform GST Registration, payment and Input tax Credit
  • To eliminate the cascading effect of Indirect taxes on single transaction
  • Subsume all indirect taxes at Centre and State Level under
  • Reduce tax evasion and corruption
  • Increase productivity
  • Increase Tax to GDP Ratio and revenue surplus
  • Increase Compliance
  • Reducing economic distortions

GST has the disadvantage(s) as follows:

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Complete lack of adaptation mechanisms and trained staff.

  2. Unclear estimate of the exact impact of GST.

  3. No clear mechanisms to control tax evasion.

  4. All of the above

Show answer
Correct Option: D
Explanation:
  • Some Economist say that GST in India would impact negatively on the real estate market. It would add up to 8 percent to the cost of new homes and reduce demand by about 12 percent.
  • Some Experts says that CGST(Central GST), SGST(State GST) are nothing but new names for Central Excise/Service Tax, VAT and CST. Hence, there is no major reduction in the number of tax layers.
  • Some retail products currently have only four percent tax on them. After GST, garments and clothes could become more expensive.
  • The aviation industry would be affected. Service taxes on airfares currently range from six to nine percent. With GST, this rate will surpass fifteen percent and effectively double the tax rate.
  • Adoption and migration to the new GST system would involve teething troubles and learning for the entire ecosystem.

The ________ is the key decision-making body that will take all important decisions regarding the GST.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Union Government

  2. GST council

  3. State Government

  4. None of the above

Show answer
Correct Option: B
Explanation:

The GST council is the key decision-making body that will take all important decisions regarding the GST. The GST Council dictates tax rate, tax exemption, the due date of forms, tax laws, and tax deadlines, keeping in mind special rates and provisions for some states. The predominant responsibility of the GST Council is to ensure to have one uniform tax rate for goods and services across the nation.

The advantages of GST accruing to the Central/State Government are listed as:

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. A unified common national market to boost Foreign Investment and Make in India campaign.

  2. Improving the overall investment climate in the country which will benefit the development of states.

  3. Uniform SGST and IGST rates to reduce the incentive for tax evasion.

  4. All of the above

Show answer
Correct Option: D
Explanation:
  • Simple and easy to administer
GST replaces multiple indirect taxes at the Central and State levels. 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. All the management of GST would be handled by the GSTN.
  • Better control on leakage
Because of the Advanced IT platform, it would be difficult to evade GST. The system of GST also promotes the tax payment.A businessman can claim tax credit only if it has the tax invoice for the purchase. If it doesn’t have tax invoice of a purchase, It has to bear whole tax. Thus, a retailer would ask tax invoice from the dealer and in return dealer would ask tax invoice from the manufacturer.The in-built mechanism in the design of GST incentivizes tax compliance by the traders.
  • Higher revenue efficiency
GST is expected to decrease the cost of tax collection. It will lead to higher revenue efficiency. The duplication of indirect tax collection would end after the GST. It would finally decrease the cost of revenue collection. Both, the centre and state government would benefit.

The advantages of GST accruing to the Trade/ industry are listed as:

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Reduction in multiplicity of taxes.

  2. Mitigation of cascading/double taxation.

  3. More efficient neutralization of taxes especially for exports.

  4. All of the above

Show answer
Correct Option: D
Explanation:
  • Transparent 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.
  • Uniform 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.
  • Minimal 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.
  •  Benefits 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. The GST would decrease the cost of locally manufactured goods because of the following reasons.
  1. Most of the central and state taxes would go away
  2. Central Sales Tax would not be charged
  3. Complete and comprehensive set-off of the input goods and services.
  4.  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.
  • Reduce Hassle and Expense: The GST not only replaces various taxes but also It would be easier for the businessmen. Currently, a Businessman has to various taxes, file return and reply for the scrutiny. The businessman has to visit many tax offices. The GST would end all these hassles.
There would be an advanced IT platform for the GST. It will handle the all related issue of GST. This platform would be used in the whole country. This platform would facilitate Single registration, Single payment, and Single return. All the process would be online. It would make the whole system of GST payment and return filing easy and transparent.

The Chairperson of GST Council is _____.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. the Union Finance Minister

  2. the Union Minister of State

  3. Minister nominated by a State

  4. all of the above

Show answer
Correct Option: D
Explanation:
According to the article, GST Council will be a joint forum for the Centre and the States. It consists of the following members:

The Union Finance Minister, Arun Jaitley will be the Chairperson
As a member, the Union Minister of State will be in charge of Revenue of Finance
The Minister in charge of finance or taxation or any other Minister nominated by each State government, as members.

The GST Council dictates __________.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. tax rate

  2. tax exemption

  3. tax laws

  4. all of the above

Show answer
Correct Option: D
Explanation:

The GST council is the key decision-making body that will take all important decisions regarding the GST. The GST Council dictates tax rate, tax exemption, the due date of forms, tax laws, and tax deadlines, keeping in mind special rates and provisions for some states.

MODVAT was introduced in the Union Budget of:

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. 1986-87

  2. 1996-97

  3. 2006-07

  4. None of the above

Show answer
Correct Option: A
Explanation:

MODVAT was introduced in the Union Budget of 1986-87. MODVAT stands for Modified Value Added Tax. 

Which among the following is an indirect tax?

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Income tax

  2. Wealth tax

  3. Custom duty

  4. Gift tax

Show answer
Correct Option: C
Explanation:

Custom duty is the example of an indirect tax and others income tax, wealth tax and gift tax are example of direct tax.

Among the following types of taxes, find the one which is Indirect.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Gift Tax

  2. Corporate Income Tax

  3. GST

  4. Wealth Tax

Show answer
Correct Option: C
Explanation:
An indirect tax is a tax which is imposed on one person and is paid partly or wholly by another party. This means that the effect or incidence of an indirect tax is not upon the party who pays the tax but on someone else. For example, sales tax is imposed on the sales of a business. This tax is collected by the seller from his customers and paid to the government. Here the seller does not bear the impact of the tax, rather he simply collects the tax and deposits the same with the sales tax department. The impact of the tax is borne by the customer who actually purchases the goods. Since this tax is paid not by the buyer himself, but by the seller, it is called indirect tax. Other examples of indirect taxes are value added tax, excise duty, service tax, GST etc

In India tax evasion is high at:

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. 20 %

  2. 15%

  3. 30%

  4. 18%

Show answer
Correct Option: A
Explanation:
India's top tax rate is currently 30 per cent. But it is not just the rich evading their taxes. Less than 3 per cent of Indians file income-tax returns at all, and officials said only about 1.5 million taxpayers claim they earn more than one million rupees per year. In the current year, of the 76 lakh individual assesses who declared income of above Rs 5 lakh, 56 lakh are in the salaried class.

A credit note is issued by ___________ and it is a document accepted for GST purposes.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Recipient, for reducing the tax/ taxable value;

  2. Supplier, for reducing the tax/ taxable value;

  3. Supplier, for increasing the tax/ taxable value;

  4. Recipient, for increasing the tax/ taxable value.

Show answer
Correct Option: B

Suppose tax exempted goods under earlier law dispatched within 6 months prior to the appointed day are returned back within 6 months from the appointed day. How, the tax element involved in the return supply will be treated under GST?

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Subject to tax at the appropriate rate of GST

  2. No GST

  3. At the half rate of the GST

  4. Only SGST is charged

Show answer
Correct Option: B

Is there any time limit for issue of notice under section 76 in cases where tax collected but not paid?

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. No time limit

  2. 1 year

  3. 3 years

  4. 5 years

Show answer
Correct Option: A

What is/are the condition for availing ITC on the tax element involved in the stock held by a composition dealer under earlier law, if such dealer opts normal tax remittance in GST?

  1. Such stock should be taxable u

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. i, ii & iii

  2. i, ii & iv

  3. ii, iii & iv

  4. i, ii, iii & iv

Show answer
Correct Option: D

A person having a unit(s) in a Special Economic Zone or being a Special Economic Zone developer shall make a separate application for registration under GST.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

Proviso to Rule 1 of the Final Registration Rules under GST mandates that a person having a unit(s) in a Special Economic Zone or being a Special Economic Zone developer shall make a separate application for registration as a business vertical distinct from his other units located outside the Special Economic Zone.

Who cannot opt for Composition Scheme under GST?

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Taxpayer supplying exempt supplies.

  2. Supplier of services other than restaurant related services.

  3. Casual taxable person or a non-resident taxable person.

  4. All of the above

Show answer
Correct Option: D
Explanation:
The following people cannot opt for the scheme:

Supplier of services other than restaurant related services
Manufacturer of ice cream, pan masala, or tobacco
Casual taxable person or a non-resident taxable person
Businesses which supply goods through an e-commerce operator

Exemptions of Goods under GST apply to which of the following?

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. Animal feeds and supplements

  2. Fresh milk and pasteurized milk

  3. Khadi garments /goods and made-ups

  4. All of the above

Show answer
Correct Option: D
Explanation:

List of Exempted Goods under GST includes:

Animal feeds and supplements, Fresh milk and pasteurized milk,Khadi garments /goods and made-ups

In India, GST became effective from _______.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. 1st April, 2017

  2. 1st January, 2017

  3. 1st July, 2017

  4. 1st March, 2017

Show answer
Correct Option: C
Explanation:
The Goods and Services tax came into effect from July 1, 2017 through the implementation of 101st Amendment of the Constitution of India by the Indian government. The tax replaced existing multiple cascading taxes levied by the central and state governments.

Disadvantages of GST include _______.

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. increased costs due to software purchase

  2. smaller businesses, especially in the manufacturing sector will face difficulties under GST.

  3. GST came into effect in the middle of the financial year

  4. all of the above

Show answer
Correct Option: D
Explanation:

Disadvantages of GST include:

  • Increased costs due to software purchase
  • Being GST-compliant
  • GST will mean an increase in operational costs
  • GST came into effect in the middle of the financial year
  • GST is an online taxation system
  • SMEs will have a higher tax burden

Advantages of GST:

commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

  1. It eliminates the cascading effect of tax.

  2. Under GST, small businesses (with a turnover of Rs 20 to 75 lakh) can benefit.

  3. The number of compliance is lesser

  4. All of the above

Show answer
Correct Option: D
Explanation:

Advantages of GST are

  • GST eliminates the cascading effect of tax
  • Higher threshold for registration
  • Composition scheme for small businesses
  • Simple and easy online procedure
  • The number of compliances is lesser
  • Defined treatment for E-commerce operators
  • Improved efficiency of logistics
  • Unorganized sector is regulated under GST

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