taxes types, methods & budgeting process section 2 MCQ Questions & Answers Detailed Explanation

Answer: (b)

Goods and Services Tax Network (GSTN) is a Section 8 (under new companies Act, not for profit companies are governed under section 8), non-Government company.

(But cabinet has approved a decision to make it a wholly-owned govt. company).

It was incorporated on March 28, 2013. The Company has been set up primarily to provide IT infrastructure and services to the Central and State Governments, taxpayers and other stakeholders for implementation of the Goods and Services Tax (GST).

Answer: (c)

Exports, imports and movement of goods from one state to another state is treated as an interstate supply for the purpose of GST.

On imports, first customs duty is imposed and then Integrated GST (IGST) is also imposed.

Answer: (c)

The Finance Commission recommends for devolution of taxes (from the divisible pool) from Centre to States only (called Vertical devolution) and is not meant for UTs, whether they have their own assembly/legislature or not.

The Fifteenth Finance Commission (FFC) recommendations will be applicable for six years period from 2020-21 to 2025-26. For the year 2020-21, the recommendations have been submitted and the final recommendations for the five-year period 2021-22 to 2025- 26 will be submitted by October 2020.

FFC quoted:

“The State of Jammu & Kashmir was reorganised into the Union Territories (UT) of Ladakh and Jammu & Kashmir through the Jammu & Kashmir Reorganisation Act, 2019. Article 280 of the Constitution, along with the Jammu and Kashmir Reorganisation Act puts the newly-created UTs of Ladakh and Jammu and Kashmir outside the purview of the Finance Commission's award.

Since UTs are the responsibilities of the Union, they are within the purview of the Union budget. We have notionally estimated that the share of the erstwhile State of Jammu & Kashmir would have come to around 0.85 per cent of the divisible pool. We believe that there is a strong case for enhancing this to 1 per cent of the divisible pool in order to meet the security and other special needs of the Union Territories of Jammu and Kashmir and Ladakh.

Since this enhancement has to be met from the Union' Government's resources (through Ministry of Home Affairs), we recommend that aggregate share of States may be reduced by 1 percentage point to 41 per cent of the divisible pool.”

So basically, FFC has not recommended the transfer of taxes to Jammu & Kashmir and Ladakh Union Territories for the period 2020-21.

Answer: (d)

Those receipts/expenditures of the government which changes the liability or the assets (physical or financial) of the Govt. comes under capital budget.

Expenditure on the acquisition of assets like roads or buildings come under capital expenditure.

Loans received increases the liability and loans given by govt. increases the assets of govt., hence the capital budget.

Answer: (a)

There are certain capital receipts of the Central Government which do not create debt/liability on it. For example, when the government is selling its shares in PSUs it is capital receipts but is not creating debt on Govt. rather it is decreasing its assets. In the same way recovery of loans is capital receipt but does not create debt.

But, if the Govt. issues securities (treasury bills) then it will be debt creating capital receipts. And money received in Public Account are liabilities for Govt. of India and are considered as debt creating capital receipts.

Answer: (b)