public finance fiscal & monetary policy section 7 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (d)

A currency is said to be convertible when it can be freely exchanged for another currency at market rates.

Transaction of current account includes dealing with payments relating to foreign trade, travel and other services. Capital account deals with transactions in financial assets.

While India has made the Indian rupee fully convertible on the current account, it is yet to accept capital account convertibility as a goal.

Broadly, capital account convertibility would mean freedom for firms and residents to freely buy into overseas assets such as equity, bonds, property, and acquire ownership of overseas firms besides free repatriation of proceeds by foreign investors

Answer: (d)

The Shome Committee which was appointed to look into the guidelines of General Anti-Avoidance Rules (GAAR) has recommended retrospective application of tax law only in rarest of rare cases.

It recommends:

1. To correct anomalies in tax laws,
2. to protect the tax base from abusive tax planning schemes with a purpose
3. to avoid tax
4. to correct technical/ procedural defects.

Answer: (a)

Answer: (a)

Value Added Tax (VAT) is imposed on the value added to each commodity by a firm during all stages of production and distribution.

In simple terms, it is a fee assessed against businesses at each step of the production and distribution process, usually whenever a product is resold or value is added to it.

Value-added taxation in India was introduced as an indirect value-added tax (VAT) into the Indian taxation system from 1 April 2005.

Answer: (c)