taxes types, methods & budgeting process section 5 MCQ Questions & Answers Detailed Explanation

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.

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.

Answer: (b)

The term ‘Inverted Duty Structure’ refers to a situation where the rate of tax on inputs purchased is more than the rate of tax on outward supplies (or finished products).

This is the result of several tax rates of 0%, 5%, 12%, 18% and 28% in our GST structure.

For example, on "Paper" we have a 5% GST rate but on Books (a finished product) we have a 0% GST rate, so it is a classic case of inverted duty structure.

This creates a problem in claiming input tax credit as the supplier in the chain pays taxes on inputs purchased but he does not collect taxes from the outward supplies.

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.

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.

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.