Understanding Taxes and GST in India

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Questions and Answers

What was the total invoice value calculated under the earlier tax regime for goods manufactured at `1000/-?

`1,300.00

`1,240.50

`1,285.88 (correct)

`1,260.88

What was the VAT rate applicable on the taxable value under the earlier tax regime?

14.30% (correct)

15.00%

12.50%

10.00%

Why was the set-off between CENVAT and State-Level VAT not possible?

They were both local taxes.

CENVAT was a consumption tax only.

They had differing tax rates.

CENVAT was a central levy and VAT was a state levy. (correct)

What additional taxes were mentioned as not being subsumed under VAT?

Luxury Tax and Entertainment Tax Signup and view all the answers

Which type of tax was identified as creating a cascading effect and not being VAT-able?

CST Signup and view all the answers

What was the total amount a dealer in Delhi must pay for output tax liability after selling goods for `1200/-?

`150 Signup and view all the answers

What was the effect of excluding services from the tax base of the States?

Potential erosion of tax buoyancy in the service sector. Signup and view all the answers

What is one basic principle of consumption taxes that CST contradicted?

Tax revenue should accrue to the place of consumption. Signup and view all the answers

What is the primary characteristic that distinguishes a direct tax from an indirect tax?

Direct taxes are imposed on the taxpayer themselves. Signup and view all the answers

Which of the following taxes is classified as a direct tax in India?

Income Tax Signup and view all the answers

What is the nature of indirect taxes and why are they considered regressive?

They affect all consumers equally, regardless of income. Signup and view all the answers

Which tax was replaced by the Goods and Services Tax (GST) in India?

Service Tax Signup and view all the answers

What does the term 'tax incidence' refer to in the context of indirect taxes?

The person (or entity) that ultimately bears the burden of the tax. Signup and view all the answers

Which of the following statements best describes a tax?

A compulsory payment that supports government services. Signup and view all the answers

What was a significant tax reform introduced in India on July 1, 2017?

Introduction of Goods and Services Tax (GST). Signup and view all the answers

Which of the following is NOT classified as an indirect tax in India?

Income Tax Signup and view all the answers

Which State has a threshold limit of ₹10 lakh for suppliers of goods and/or services?

Mizoram Signup and view all the answers

Which of the following states has a threshold limit of ₹20 lakh for an exclusive supplier of goods and/or services?

Arunachal Pradesh Signup and view all the answers

What is the threshold limit for exclusive suppliers of goods making only intra-State supplies?

₹40 lakh Signup and view all the answers

Which of the following states does NOT have a threshold limit of ₹20 lakh for suppliers of goods and/or services?

Mizoram Signup and view all the answers

In which cases is mandatory registration under GST required regardless of the aggregate turnover?

For certain specified cases Signup and view all the answers

What type of tax is GST considered and where does the revenue of SGST accrue?

Destination-based consumption tax; to consuming States Signup and view all the answers

How can inter-State suppliers in the exporting State utilize their available credit?

Set it off against the IGST payable Signup and view all the answers

What option is available to the buyer in the importing State regarding IGST payment?

Can avail credit of IGST paid on inter-State purchases Signup and view all the answers

What is the primary purpose of a GSP in the GST System?

To help taxpayers develop applications for GST-related tasks. Signup and view all the answers

Which of the following is NOT a feature provided by GSP applications?

Tax filing automation without user input. Signup and view all the answers

How long was the GST Compensation Cess initially levied?

5 years. Signup and view all the answers

Which of the following items is subject to GST Compensation Cess?

Pan masala. Signup and view all the answers

Under the GST system, which of these items is explicitly excluded from GST?

Alcoholic liquor for human consumption. Signup and view all the answers

What role do Application Service Providers (ASPs) have in relation to GSPs?

They link taxpayers and GSPs. Signup and view all the answers

What is the extended deadline for the levy and collection of GST Compensation Cess?

March 31, 2026. Signup and view all the answers

Which of the following statements about GSP services is true?

GSPs can provide role-based access for different GST activities. Signup and view all the answers

What weightage does the vote of the Central Government carry in the GST Council?

One-third of the total votes cast Signup and view all the answers

Which principle describes how decisions are made in the GST Council?

Majority of not less than three-fourths of weighted votes Signup and view all the answers

Under what condition can the GST Council's proceedings be considered invalid?

If there is a vacancy or defect in the constitution of the Council Signup and view all the answers

What types of disputes does the Goods and Services Tax Council adjudicate?

Disputes between the Central Government and one or more States, or among States Signup and view all the answers

What is the required majority in Parliament to amend Article 279A pertaining to the GST Council?

Two-thirds majority in each house and ratification by half of the States Signup and view all the answers

Which factor does NOT influence the weightage of votes in the GST Council?

The total number of States participating Signup and view all the answers

What type of irregularity could affect the validity of the GST Council's proceedings?

A procedural irregularity affecting the case's merits Signup and view all the answers

What happens to the decision-making if the GST Council does not meet quorum?

No decisions can be made until a quorum is established Signup and view all the answers

Study Notes

What are Taxes?

Taxes are a mandatory financial contribution collected by the government to fund public services.
Direct tax is a liability that falls directly on a taxpayer and cannot be transferred to someone else.
A direct tax is a significant source of government revenue, income tax is a major example.

What are Indirect Taxes?

Indirect taxes are levied on the consumption of goods and services, not income or property.
Consumers pay indirect taxes and businesses are responsible for collecting them.
Indirect taxes are generally considered regressive because they affect all consumers equally, regardless of their income.

What is the Goods and Services Tax (GST)?

GST is a unified indirect tax system introduced in India on July 1, 2017.
It replaced numerous central and state indirect taxes, creating a single tax regime.
GST is a destination-based tax, the revenue accrues to the consuming state.

How does GST Work?

GST is collected at each stage of the supply chain, from manufacturing to sale.
Under GST, credits are available for taxes paid on inputs (e.g., raw materials) for the manufacturer.
The final consumer pays the GST on the finished product.

Advantages of GST

Simplified tax system: A single tax replaces multiple taxes.
Reduced cascading effect: eliminates the cascading impact of taxes on the final price.
Increased tax compliance: a more transparent and streamlined system with better compliance.
Improved tax administration: streamlined tax structure simplifies administration.

GST Compensation Cess

A levy imposed on specific luxury items (e.g., pan masala, tobacco, aerated waters, motor cars) to compensate states for revenue loss due to GST implementation.

GST Council

The council is the governing body of GST, responsible for its effective implementation.
It consists of representatives from the central and state governments.
The council is responsible for determining the GST rates, making adjustments to the system, and resolving disputes.

Important Exclusions from GST

Alcoholic liquor for human consumption is outside the purview of GST.
Petroleum crude, diesel, petrol, ATF, and natural gas are not subject to GST.

Specific Provisions for GST

The GST Council establishes a mechanism for dispute resolution between the central government, states, and taxpayers.
Article 279A of the Indian Constitution, which relates to GST Council, requires specific amendment procedures.

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Description

This quiz explores the fundamental concepts of taxes, focusing on direct and indirect taxes, including the Goods and Services Tax (GST) implemented in India. Understand how taxes function as mandatory contributions to government revenue and how GST simplifies the tax structure. Test your knowledge on these essential financial principles.