taxes types, methods & budgeting process section 5 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 : Which among the following are true for Central Sales Tax?
  1. It is levied on interstate trade.
  2. It is levied in the Union Territories.
  3. It is levied in the SEZ.
Select the correct answer from the codes given below.

(a) Only 2

(b) Only 2 and 3

(c) Only 1 and 2

(d) All of these

The correct answers to the above question in:

Answer: (c)

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Question : 1

Corporation tax is imposed by

a) Local Government

b) State Government

c) Central Government

d) State as well as Central Government

Answer: (c)

Corporation Tax is imposed by Central Government.

Question : 2

Which one of the following is not a tax/duty levied by the Government of India?

a) Education Cess

b) Custom Duty

c) Service Tax

d) Toll Tax

Answer: (d)

Question : 3

Surplus reserve of RBI transferred to Government of India (GOI) will come under which of the following?

a) Non-tax revenue receipts

b) Non-debt capital receipts

c) Market borrowings and other liabilities

d) Debt receipts

Answer: (a)

The RBI transferred its (accumulated) surplus reserve to its annual income and then this annual income was transferred to Govt. of India as a dividend.

Dividend from PSUs (RBI is a PSU which is 100% owned by Govt. of India) is considered as non-tax revenue receipts.

Question : 4

Consider the following statements regarding the "Composition Scheme" in GST:

  1. It exempts small taxpayers from payment of GST
  2. It allows small businesses to pay tax at a fixed per cent of their turnover
  3. It reduces the compliance cost for small businesses
Select the correct answer using the code given below:

a) (i) & (iii) only

b) (ii) only

c) (i) only

d) (ii) & (iii) only

Answer: (d)

Composition levy is an alternative method of levy of tax designed for small businesses whose turnover is up to Rs. 1.5 crore (and above 40 lacs). The objective of the composition scheme is to bring simplicity and to reduce the compliance cost for small businesses.

Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a 1% flat rate, of his turnover, instead of paying tax at the normal GST rate.

Similarly, small service providers with a turnover of Rs. 50 lakhs can opt for a composition scheme and pay GST at 6%. In the case of a composition scheme, the businesses can’t claim an input tax credit.

Question : 5

The most important source of revenue for Indian Government is

a) Indirect Tax

b) Deficit financing

c) Direct Tax

d) Loans from RBI

Answer: (c)

Question : 6

Which of the following is associated with fiscal policy?

a) Consumption

b) Inflation

c) Taxation

d) Money supply

Answer: (a)

Fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are changes in the level and composition of taxation and government spending in various sectors.

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