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
- Total expenditure minus total receipts
- Total expenditure minus total receipts excluding borrowing
- Revenue deficit plus capital expenditure minus non-debt creating capital receipts
- Total borrowing
(a) (ii) & (iii) only
(b) (ii), (iii) & (iv) only
(c) (i) & (iv) only
(d) All of the above
The correct answers to the above question in:
Answer: (b)
Fiscal Deficit = Total Expenditure - Total Receipts except borrowing
= (Rev Exp. + Cap Exp.) - (Rev Rec. + Cap Rec. except borrowing)
= (Rev Exp. - Rev Rec.) + (Cap Exp. - Cap Rec. except borrowing)
= Revenue Deficit + Cap Exp. - Cap Rec. except borrowing
= Total borrowing
= Net borrowing at home + borrowing from RBI + Borrowing from abroad
Let us understand with an example.
Suppose, government's total expenditure = 17 lakh crore and receipts = 13 lakh crore
Then the government will have to borrow (17 lakh crore -13 lakh crore) 4 lakh crore to meet its expenditure. And this 4 lakh crore is called the fiscal deficit. That is why the fiscal deficit is also equal to the total borrowing i.e. 4 lakh crore.
But this 4 lakh crore which government borrows becomes part of capital receipt for the government and it must be included in capital receipts. So, in the actual sense government's total receipts will become 17 lakh crore (i.e. 13 lakh crore + 4 lakh crore borrowing).
Hence, in the above example:
Fiscal Deficit = Total expenditure - total receipts except borrowing
Otherwise, the difference between total expenditure and total receipts will always be zero.
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Read more taxes types methods budgeting process Based Indian Economy Questions and Answers
Question : 1
Which UT/State’s per capita SGDP has been taken as the reference by the Fifteenth Finance Commission for calculating the ‘income distance’?
a) Haryana
b) Delhi
c) Goa
d) Maharashtra
Answer »Answer: (a)
‘Income distance’ is calculated as the difference between the per capita gross state domestic product (GSDP) of the state from that of the state with the highest per capita GSDP. This ensures that states with less income get a higher share in order to allow them to provide services comparable to those provided by the richer ones.
The XV FC used the per capita GSDP of Haryana as the reference for calculating the income distance, and has given it a weight of 45%, down from the 50% assigned by the XIV FC.
Question : 2
What does "Revenue Neutral Tax Rate" means in reference to the Goods and Services Tax":
a) The tax rate will be same for the Centre and State
b) The tax rate at which Central and States revenues will be same
c) That GST rate at which tax (indirect) revenues of States and Centre will not get impacted after implementation of GST
d) All of the above
Answer »Answer: (c)
Revenue neutral tax rate means that the average GST rate should be such that the indirect tax revenues of the government after the implementation of GST should not be impacted as compared to before implementation of GST and that such GST rate was estimated by ex-Economic Advisor as on an average 16%.
That means if we keep the GST rate on an average of 16%, then whatever revenue collection was there before GST will not get impacted after GST.
Actually, Before GST, States indirect tax revenues were growing at 14%, so in GST we have tried to keep such a GST rate (16% revenue-neutral rate) so that even after GST, states revenue should continue to grow at 14% and if does not happen, then States will be compensated for the first five years.
Question : 3
Which of the following statements are true regarding the "Electronic - Way Bill"?
- It is mandatory as per the GST law
- It is a replacement of the Way Bill which was required under the VAT regime
- It is required for goods transported worth more than Rs. 50,000/-
- It will check tax evasion
a) (i) & (iv) only
b) (i) & (iii) only
c) (i) only
d) All of the above
Answer »Answer: (d)
Electronic Way Bill (E-Way Bill) is a document issued by a carrier giving details and instructions relating to the shipment of a consignment of goods like name of the consignor, consignee, the point of origin of the consignment, its destination, and route.
If the value of goods transported is more than worth Rs. 50,000/- then the e-way bill should be generated.
E-Way Bill is basically a compliance mechanism wherein by way of a digital interface the person causing the movement of goods uploads the relevant information prior to the commencement of movement of goods and generates an e-way bill on the GST portal.
An E-way bill is a mechanism to ensure that goods being transported comply with the GST Law and is an effective tool to track the movement of goods and check tax evasion. The E-Way bill under the GST regime replaces the Waybill (which was a physical document) which was required under the VAT regime for the movement of goods.
Question : 4
Consider the following statements regarding the presentation of the Budget in the Parliament:
- Finance Bill is introduced on the very first day when the Finance Minister presents Budget in the Parliament
- Appropriation Bill is introduced after the voting on demand for grants is over
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »Answer: (b)
The budget is discussed in two stages - the general discussion followed by a detailed discussion.
1st Feb 31st March Detailed Discussion On 1st Feb, the Finance bill is also introduced after the budget presentation.
Question : 5
The term ‘Crowd-in’ in the economy is related to which of the following?
- Targeted government spending acts as an engine of growth in the short run
- Government spending complements the private investment
- Government spending substitutes the private investment
- Government spending boosts demand for goods which in turn increases private demand
a) (i) & (iii) only
b) (i), (ii) & (iv) only
c) (i) & (ii) only
d) (i), (iii) & (iv) only
Answer »Answer: (b)
The opposite of crowding out is "crowding in" where private investment increases as debt-financed government spending increases.
If the economy is in a slowdown phase or the demand in the economy is less, then an increased government spending boosts the demand for goods which in turn increases the private sector demand for new output sources such as factories, equipment.
Thus, the private sector crowds in to satisfy increasing consumer needs.
Question : 6
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 »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.
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taxes types, methods & budgeting process section 5
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