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

Answer: (a)

The fiscal Deficit is govt of India’s borrowing either from domestic sources or from abroad.

So, when Govt. of India issues bonds to borrow money, it can be purchased by FPI’s also. But FDI is into equity/shares and not in debt instruments.

Answer: (d)

Answer: (d)

Suppose GST on the car of Rs. 5 lacs is Rs. 1 lakh.

Now if I purchase one car then I will pay Rs. 1 lakh tax and if my income is Rs. 10 lacs then tax as a percentage of income will be:

1 lakh x 100% =10% 10 lakhs

Suppose the same car a rich person purchases whose income is Rs 10 crores then tax as a percentage of his income will be:

1 lakh x 100% = 0.1% 10 crores

So, a rich person pays less tax as a percentage of his income, hence GST is regressive.

In a similar way, all indirect taxes are regressive in nature. Income tax is progressive, as poor people need to pay less tax rate as compared to rich people.

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: (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: (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.