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
- Foreign Direct Investment (FDI)
- Foreign Portfolio Investment (FPI)
(a) (ii) only
(b) Both (i) (ii)
(c) (i) only
(d) Neither (i) nor (ii)
The correct answers to the above question in:
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.
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Read more taxes types methods budgeting process Based Indian Economy Questions and Answers
Question : 1
Corporation tax
a) is levied by the Union and collected and appropriated by the states
b) is levied by the Union and shared by Union and the states
c) is levied and appropriated by the states
d) is levied by the Union and belongs to it exclusively
Answer »Answer: (d)
Question : 2
Which of the following taxes are regressive in nature?
- Income Tax
- Sales Tax
- Goods & Services Tax (GST)
- Value Added Tax (VAT)
a) (ii) only
b) (i) & (ii) only
c) (i) only
d) (ii), (iii) & (iv) only
Answer »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.
Question : 3
Which of the following department prepares outcome budget?
a) Budget division under department of Economic affairs
b) Department of financial services
c) Public finance division under department of expenditure
d) NITI Aayog
Answer »Answer: (c)
The Public Finance (Central) Division, under Department of Expenditure, Ministry of Finance is responsible for preparation of outcome budgets in consultation with the NITI Aayog.
This output-outcome framework (outcome budget) is prepared for all Centrally Sponsored Schemes (CSSs) and Central Sector Schemes (CSs) dealing with identified measurable outcomes in the relevant medium-term framework and physical and financial outputs are targeted on a year to year basis.
For example, suppose if government is budgeting Rs. 30,000 crores for the LPG subsidy for FY 2020-21 then under the outcome budget it may set a target that it is planning to distribute LPG cylinders to 10 crore households.
Question : 4
Consider the following taxes
- Corporation tax
- Income tax
- Service tax
- Union Excise Duties
a) (iii) (ii) (i) (iv)
b) (i) (ii) (iv) (iii)
c) (ii) (i) (iii) (iv)
d) (iv) (i) (ii) (iii)
Answer »Answer: (b)
As per the union budget 2016-17, the share of taxes is one rupee.
Corporation tax | 19 Paise |
Income tax | 14 Paise |
Service tax | 9 Paise |
Union Excise Duty | 12 Paise |
Question : 5
Consider the following statements regarding inverted duty structure in GST:
- It is the result of several tax slabs in our GST structure
- It creates problem in claiming input tax credit
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »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.
Question : 6
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.
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