taxes types, methods & budgeting process section 1 MCQ Questions & Answers Detailed Explanation

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The following question based on Taxes Types, Methods & Budgeting Process topic of indian economy mcq

Questions : The term “Pump Priming” means:
  1. It is a way to stimulate the economy by reducing tax
  2. It is done in economic slowdown by increasing government spending
  3. RBI prints extra money
Select the correct answer using the code given below:

(a) (i) & (ii) only

(b) (iii) only

(c) (i) only

(d) All of the above

The correct answers to the above question in:

Answer: (a)

Pump priming is the action taken to stimulate an economy, usually during a recessionary period, through government spending and tax reductions.

The term pump-priming is derived from the operation of older pumps - a suction valve had to be primed with water so that the pump would function properly.

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Question : 1

Which of the following statements about Krishi Kalyan Cess (KKC) is/are correct ?

  1. KKC is calculated in the same way as Service Tax is calculated.
  2. The current rate of KKC is 0.50%
  3. KKC is similar to the KKS (Krishi Kalyan Surcharge).
Select the correct answer using the code given below:

a) 2 and 3 only

b) 1, 2 and 3

c) 1 and 2 only

d) 1 only

Answer: (c)

KK Surcharge is the additional percentage of tax which domestic tax players need to pay when declaring undisclosed income by paying tax at 30%. The KKS above the tax is 7.5%.

Question : 2

With reference to the ‘Prohibition of Benami Property Transactions Act, 1988 (PBPT Act)’, consider the following statements:

  1. A property transaction is not treated as a Benami transaction if the owner of the property is not aware of the transaction.
  2. Properties held by Benami are liable for confiscation by the Government.
  3. The Act provides for three authorities for investigations but does not provide for any appellate mechanism.
Which of the statements given above is/are correct?

a) 1 and 3 only

b) 1 only

c) 2 only

d) 2 and 3 only

Answer: (c)

The act provides is an appellate tribunal, and they’re required to finish the case within one year.

So #3 is wrong, by elimination, we are left with A and B.

So, C is most appropriate because IT dept (therefore, Government) can seize the Benami properties.

Question : 3

Consider the following statements regarding the GST Compensation Cess:

  1. It is levied and collected by the Centre
  2. GST compensation fund has been established in Consolidated Fund of India
  3. The States will be compensated if their nominal revenue growth is less than 14% after the implementation of GST.
Select the correct answer using the code given below:

a) (ii) only

b) (i) & (iii) only

c) (i) only

d) All of the above

Answer: (b)

When Central govt was planning to introduce GST, States were worried that after the implementation of GST the tax revenue of States may fall and they will not have the freedom under GST to impose extra taxes or increase the tax rate.

So, Central government calculated the tax revenue growth of State's indirect taxes from 2012-13 to 2013-14, 2013-14 to 2014-15 and 2014-15 to 2015-16,

i.e. for three years and the result was on average growth of 14%. So, Govt. of India promised states and UTs that if after implementation of GST the States/UTs Indirect Revenue growth will be less than 14% annually from 2015-16 (base year) onwards, then the Govt. of India will compensate states/UTs.

Accordingly, The GST Compensation to States Act 2017 (GoI Act) was enacted. The GST council recommends on what items (mostly luxury and demerit goods) cess will be imposed and at what rate. The compensation cess will be levied for five years. In 2019-20, the Central government has compensated more than Rs. 1 lakh crore to states.

Govt of India levies and collects the Cess and keeps it in “GST Compensation Fund” in Public Account of India (because it is not Govt. of India’s money and it belongs to States) and then it transfers to States/UTs.

Question : 4

Which of the following tax is levied by Union but collected and appropriated by States?

a) Passenger & Goods Tax

b) Taxes on Newspapers

c) Stamp Duties

d) None of the above/More than one of the above

Answer: (c)

Question : 5

Which of the following are part of Capital Budget of Govt. of India?

  1. Proceeds received in the public account of India
  2. PSUs purchasing capital equipment
  3. Establishment of “India Post Payment Bank”
Select the correct answer using the code given below:

a) (ii) & (iii) only

b) (i) & (iii) only

c) (i) only

d) None of the above

Answer: (b)

Money received in Public Account of India creates liability on Govt. of India and hence it’s a part of capital receipt/budget.

India Post Payment Bank is a PSU and expenditures done by Govt. to create a PSU (an asset) will come under capital budget/expenditure of Govt. of India. A PSU purchasing a capital equipment is not part of Govt. of India budget.

Question : 6

Consider the following statements. In India, Stamp duties on financial transactions are

  1. Levied and collected by the state
  2. Appropriated by the Union Government
Which of these statement(s) is/are correct?

a) Only 2

b) Both 1 and 2

c) Only 1

d) Neither 1 nor 2

Answer: (d)

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