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

Answer: (d)

Answer: (d)

Answer: (b)

This fund is in the nature of an imprest (a fixed fund for a specific purpose) account and is kept at the disposal of the President of India (by the Secretary to the Government of India, Ministry of Finance, Department of Economic Affairs) to enable the government to meet unforeseen expenses pending authorization by the Parliament.

The money is used to provide immediate relief to victims of natural calamities and also to implement any new policy decision taken by the Government pending its approval by the Parliament.

Answer: (c)

Tax buoyancy = ${% \text"Change in Tax Revenue"}/{%\text"Change in Nominal GDP"}$

If nominal GDP growth is 12% and Tax revenue growth in a particular year is 15% then tax buoyancy will be 15%/12% = 1.25. It tells what is the growth in tax revenue with every percentage change in GDP.

If tax buoyancy is greater than one then it is good for the economy.

Answer: (d)

When government postpones its fiscal deficit target or when the fiscal deficit increases then the interest rate in the economy goes up because the government borrows more (demand-supply concept).

When the interest rate in the economy goes up bond prices come down and the return/yield on bonds goes up.

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.