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Fiscal Policy & Revenue (Part – I)

📆 October 12, 2024

Total Questions: 50

11. Consider the following items: [I.A.S (Pre) 2018]

1. Cereal grains hulled

2. Chicken eggs cooked

3. Fish processed and canned

4. Newspapers containing advertising material

Which of the above items is/are exempted under GST (Goods and Service Tax)?

Correct Answer: (c) 1, 2 and 4 only
Solution:Presently, among the given options - hulled cereal grains, cooked chicken egg (in shell) and newspapers (with or without advertising material) are exempted (0% rate) under Goods and Services Tax (GST). Processed and canned fish and chicken eggs (not in shell) are taxable at 5% rate under GST

GST:
It is an indirect tax which has replaced many indirect taxes in India, such as excise duty, VAT, services tax, etc.
The GST Act was passed in Parliament on 29th March 2017 and came into effect on 1st July, 2017.
It is a single domestic indirect tax law for the entire country.
It is a comprehensive, multi-stage, destination-based tax that is levied on the supply of goods and services, right from the manufacturer to the consumer.

12. The 'Good and Services Tax' was proposed by a task force, whose President was: [M.P.P.C.S. (Pre) 2017]

Correct Answer: (a) Vijay Kellar
Solution:In 2003, the Central Government formed a task force headed by Vijay L. Kelkar on Fiscal Responsibility and Budget Management (FRBM), which in 2004 recommended "Goods and Services Tax (GST) to replace the existing tax regime by introducing a comprehensive tax on all goods and services replacing Central level VAT and State level VATs. It recommended replacing all indirect taxes except the customs duty with value added tax on all goods and services with complete set off in all stages of the value chain.

13. What is/are the most likely advantages of implementing "Goods and Services Tax (GST)? [I.A.S (Pre) 2017]

1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.

2. It will drastically reduce the 'Current Account Deficit of India and will enable it to increase its foreign exchange reserves.

3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future.

Select the correct answer using the code given below:

Correct Answer: (a) 1 only
Solution:Implementation of 'Goods and Services Tax (GST)" will help reduce tax rates, remove multiple point taxation, and increase revenues. It will replace multiple tax collected by multiple authorities and through uniform tax system it will create a common or single market in India. GST will boost trade, commerce and export and it will help in reduce the 'Current Account Deficit' (CAD) and increase the growth and size of economy of India but it is unlikely to drastically reduce CAD or enormously increase size of our economy. Hence, only statement 1 is correct.

14. The term 'Revenue Neutral Rate' was in news recently is related to: [U.P.R.O./A.R.O. (Mains) 2016]

Correct Answer: (a) Goods and Service Tax (GST)
Solution:Revenue Neutral Rate (RNR) is a structure of different rates established in order to match the previous revenue generation with revenue under Goods and Services Tax (GST). RNR calculations include the cascading effect on certain goods having no excise or sales tax implications. It is actually the rate of tax that allows the Government to receive the matching amount of money despite changes in the tax laws.

GST:
It is an indirect tax which has replaced many indirect taxes in India, such as excise duty, VAT, services tax, etc.
The GST Act was passed in Parliament on 29th March 2017 and came into effect on 1st July, 2017.
It is a single domestic indirect tax law for the entire country.
It is a comprehensive, multi-stage, destination-based tax that is levied on the supply of goods and services, right from the manufacturer to the consumer.

15. What Kind of tax is GST? [U.P.R.O./A.R.O. (Mains) 2017]

Correct Answer: (b) Indirect Tax
Solution:GST is known as the Goods and Services Tax. It is a single, comprehensive, indirect tax which has subsumed almost all the indirect taxes (like Service Tax, Central Excise, State Value Added Taxes-VATs etc.) except a few taxes. It is a multi- stage, destination-based tax that is levied on every value addition. The GST in India came into effect from 1 July, 2017. GST is levied on the supply of goods and services.

Features of Goods and Services Tax

  • Applicable on Supply: Under the GST regime, a taxable event is the 'supply' of Goods and Services, and not manufacturing, sales, etc.
    In other words, Goods and Services Tax is applicable to the 'supply' of                    goods or services. As opposed to the old indirect taxation regime,                            events like manufacturing, sales, etc do not matter now.
  • Consumption-based Tax: It is based on the principle of destination-based consumption taxation as against the present principle of origin-based taxation.
    Therefore, it is paid to the state where the goods and services are                             finally consumed, and not the state in which they are produced.
  • Dual Goods and Services Tax Model: India has adopted a Dual GST Model, with the Centre and the States simultaneously levying tax on a common tax base.
  • Four Components: Under the Dual GST Model implemented in India, the GST has a total of 4 components - Central GST (CGST), State GST (SGST), Union Territories GST (UTGST), and Integrated GST (IGST).
    These four components have been explained in detail in the section                         below.
  • Mutual Decision on Tax Rates: CGST, SGST, UTGST, and IGST are levied at rates to be mutually agreed upon by the Centre and the States.
    These rates are notified on the recommendation of the GST Council.
  • Multiple Rates: Tax rates for different categories of goods and services are different. At present, there are a total of 7 tax-rate slabs for various goods and a total of 5 tax-rate slabs for various services.
  • Exemptions: Businesses upto a certain level of turnover are exempted from GST. The turnover limit for exemption for various categories of businesses is as follows:

16. Which of the following taxes are abolished by the Goods and Service Tax? [Uttarakhand P.C.S. (Pre) 2021]

Correct Answer: (c) Value Added Tax
Solution:GST is known as the Goods and Services Tax. It is a single, comprehensive, indirect tax which has subsumed almost all the indirect taxes (like Service Tax, Central Excise, State Value Added Taxes-VATs etc.) except a few taxes. It is a multi- stage, destination-based tax that is levied on every value addition. The GST in India came into effect from 1 July, 2017. GST is levied on the supply of goods and services.

Features of Goods and Services Tax

  • Applicable on Supply: Under the GST regime, a taxable event is the 'supply' of Goods and Services, and not manufacturing, sales, etc.
    In other words, Goods and Services Tax is applicable to the 'supply' of                    goods or services. As opposed to the old indirect taxation regime,                            events like manufacturing, sales, etc do not matter now.
  • Consumption-based Tax: It is based on the principle of destination-based consumption taxation as against the present principle of origin-based taxation.
    Therefore, it is paid to the state where the goods and services are                             finally consumed, and not the state in which they are produced.
  • Dual Goods and Services Tax Model: India has adopted a Dual GST Model, with the Centre and the States simultaneously levying tax on a common tax base.
  • Four Components: Under the Dual GST Model implemented in India, the GST has a total of 4 components - Central GST (CGST), State GST (SGST), Union Territories GST (UTGST), and Integrated GST (IGST).
    These four components have been explained in detail in the section                         below.
  • Mutual Decision on Tax Rates: CGST, SGST, UTGST, and IGST are levied at rates to be mutually agreed upon by the Centre and the States.
    These rates are notified on the recommendation of the GST Council.
  • Multiple Rates: Tax rates for different categories of goods and services are different. At present, there are a total of 7 tax-rate slabs for various goods and a total of 5 tax-rate slabs for various services.
  • Exemptions: Businesses upto a certain level of turnover are exempted from GST. The turnover limit for exemption for various categories of businesses is as follows:

17. Which of the following Constitution (Amendment) Act provides for Goods and Services Tax (G.S.T.)? [Chhattisgarh P.C.S. (Pre) 2019]

Correct Answer: (d) The Constitution (One Hundred and First) Amendment Act, 2016
Solution:Officially known as The Constitution (One Hundred and First Amendment) Act, 2016, this amendment introduced a National Goods and Services Tax (GS.T.) in India from 1 July, 2017. It was introduced as the One Hundred and Twenty Second Amendment Bill of the Constitution of India.

Legal Framework for Goods and Services Tax

  • After the passage of the Constitution (101st Amendment) Act, the following acts were passed by the Parliament to define the legal framework for Goods and Services Tax.
    Central Goods and Services Tax Act, 2017
    Integrated Goods and Services Tax Act, 2017
    Goods and Services Tax (Compensation to States) Act, 2017
    Union Territory Goods and Services Tax Act, 2017
  • Also, each state passed their own State Goods and Services Tax Act.
  • These acts, together, provide the legal framework for Goods and Services Tax.

18. Which of the following Constitution Amendment Ach made necessary provisions for the implementation of G (Goods and Services Tax) regime? [U.P.P.C.S. (Pre) 2021]

Correct Answer: (a) 101st Amendment Act
Solution:Officially known as The Constitution (One Hundred and First Amendment) Act, 2016, this amendment introduced a National Goods and Services Tax (GS.T.) in India from 1 July, 2017. It was introduced as the One Hundred and Twenty Second Amendment Bill of the Constitution of India.

Legal Framework for Goods and Services Tax

  • After the passage of the Constitution (101st Amendment) Act, the following acts were passed by the Parliament to define the legal framework for Goods and Services Tax.
    Central Goods and Services Tax Act, 2017
    Integrated Goods and Services Tax Act, 2017
    Goods and Services Tax (Compensation to States) Act, 2017
    Union Territory Goods and Services Tax Act, 2017
  • Also, each state passed their own State Goods and Services Tax Act.
  • These acts, together, provide the legal framework for Goods and Services Tax.

19. GST (Goods and Services Tax) is now proposed to be introduced in India from: [U.P.P.C.S. (Mains) 2009]

Correct Answer: (b) April 01, 2012
Solution:As per the question year, GST (Goods and Services Tax) was proposed to be introduced in India from. April 01, 2012. Hence, option (b) was the correct answer for the question period. After passing multiple hurdles, finally GST came into effect from 1 July, 2017 through the implementation of the 101 Amendment of the Constitution (2016) by the Indian Government. GST has simplified the multiplicity of taxes on goods and services and created a common market in the country. It is aimed at reducing the cost of business operations and cascading effect of various taxes on consumers.

20. The introduction of Goods and Services Tax from July 2017 is expected to create: [U.P.P.C.S. (Mains) 2017]

Correct Answer: (d) Both (a) and (b) above
Solution:The introduction of Goods and Services Tax (GST) from July, 2017 is a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax, GST mitigated ill effects of cascading or double taxation and paving the way for a unified common national market. Some other major advantages of GST are as follows:

• Improved environment for compliance and reduction in compliance costs.

• Expansion of the tax base,

• Improve the overall investment climate in the country.

• Uniform SGST and IGST rates will reduce the incentive for evasion by eliminating rate arbitrage between neighbouring States.

• Increased ease of doing business.

• It will boost export and manufacturing activity and generate more employment.

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