taxes types, methods & budgeting process section 2 MCQ Questions & Answers Detailed Explanation
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The following question based on Taxes Types, Methods & Budgeting Process topic of indian economy mcq
- It has recommended 41% devolution from Central taxes to States in 2020-21
- It has recommended 1% devolution from Central taxes to the Union Territories of J&K and Ladakh 2020-21
(a) (ii) only
(b) Both (i) & (ii)
(c) (i) only
(d) Neither (i) nor (ii)
The correct answers to the above question in:
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.
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Read more taxes types methods budgeting process Based Indian Economy Questions and Answers
Question : 1
Which of the following are Non-Tax Receipts of the Central Government?
- Issue of Passport and Visa
- Registration of Companies
- Royalty from on shore oilfields
- Royalty from offshore oilfields
a) (i), (ii) & (iii) only
b) (i), (ii) & (iv) only
c) (i) only
d) All of the above
Answer »Answer: (b)
Royalty from onshore (on land) oilfields goes to the State Governments as State governments are the owners of the minerals beneath the land in their territory.
From offshore (within sea) oilfields, royalty goes to Central Government as Central Govt. is the owner of the offshore fields. So, (iii) statement is not true.
Question : 2
MODVAT is related to
a) Value Added Tax (VAT)
b) Wealth Tax
c) Excise Duty
d) Income Tax
Answer »Answer: (a)
Question : 3
Which of the following are included in the category of direct tax in India?
- Corporation tax
- Tax on income
- Wealth tax
- Customs duty
- Excise duty
a) 2 and 3
b) 1, 2 and 3
c) 1, 2, 4 and 5
d) 1, 3, 4 and 5
Answer »Answer: (b)
Corporation Tax, Wealth Tax and Income Tax are in the category of direct tax.
Question : 4
Consider the following statements regarding the import of goods and services in India:
- They are treated as inter-state supplies
- Customs duty and IGST both are applicable
- Only IGST is applicable
- Imports are zero-rated
a) (i) & (iii) only
b) (iii) only
c) (i) & (ii) only
d) (i) & (iv) only
Answer »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.
Question : 5
Consider the following statements regarding the Goods and Services Tax Network (GSTN):
- It is a non-government, private limited company
- It is a not for profit company
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »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).
Question : 6
Which of the following statement is true regarding “Tax Base”?
a) It is the number of people and business units under tax net
b) It is the income of people which can be taxed by the government
c) It is the number of people falling under tax net
d) It is the aggregate value of financial streams on which tax can be imposed by the government
Answer »Answer: (d)
The tax base is defined as the total value of the financial streams or assets on which tax can be imposed by the government.
For example, in the case of income tax, the tax base is the minimum amount of annual income that can be taxed by the government (taxable income). If this minimum amount (tax threshold) is lowered, this will automatically increase (widen) the tax base; if it is raised, the tax base will be narrowed.
In the case of GST, the tax base is the value of goods and services on which GST is imposed.
In the case of property tax, the tax base is the value of the property on which property tax is imposed. Because the size of the tax base influences the taxable revenues that are available to a government, the size and growth of the tax base is crucial to the planning efforts of any government.
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