MCQs
Total Questions : 163
| Page 4 of 17 pages
Question 31. Consider the following statements regarding the GST Compensation Cess:
Select the correct answer using the code given below:
- It is levied and collected by the Centre
- GST compensation fund has been established in Consolidated Fund of India
- The States will be compensated if their nominal revenue growth is less than 14% after the implementation of GST.
Select the correct answer using the code given below:
Answer: Option B. -> (i) & (iii) only
Answer: (b)
When Central govt was planning to introduce GST, States were worried that after the implementation of GST the tax revenue of States may fall and they will not have the freedom under GST to impose extra taxes or increase the tax rate.
So, Central government calculated the tax revenue growth of State's indirect taxes from 2012-13 to 2013-14, 2013-14 to 2014-15 and 2014-15 to 2015-16,
i.e. for three years and the result was on average growth of 14%. So, Govt. of India promised states and UTs that if after implementation of GST the States/UTs Indirect Revenue growth will be less than 14% annually from 2015-16 (base year) onwards, then the Govt. of India will compensate states/UTs.
Accordingly, The GST Compensation to States Act 2017 (GoI Act) was enacted. The GST council recommends on what items (mostly luxury and demerit goods) cess will be imposed and at what rate. The compensation cess will be levied for five years. In 2019-20, the Central government has compensated more than Rs. 1 lakh crore to states.
Govt of India levies and collects the Cess and keeps it in “GST Compensation Fund” in Public Account of India (because it is not Govt. of India’s money and it belongs to States) and then it transfers to States/UTs.
Answer: (b)
When Central govt was planning to introduce GST, States were worried that after the implementation of GST the tax revenue of States may fall and they will not have the freedom under GST to impose extra taxes or increase the tax rate.
So, Central government calculated the tax revenue growth of State's indirect taxes from 2012-13 to 2013-14, 2013-14 to 2014-15 and 2014-15 to 2015-16,
i.e. for three years and the result was on average growth of 14%. So, Govt. of India promised states and UTs that if after implementation of GST the States/UTs Indirect Revenue growth will be less than 14% annually from 2015-16 (base year) onwards, then the Govt. of India will compensate states/UTs.
Accordingly, The GST Compensation to States Act 2017 (GoI Act) was enacted. The GST council recommends on what items (mostly luxury and demerit goods) cess will be imposed and at what rate. The compensation cess will be levied for five years. In 2019-20, the Central government has compensated more than Rs. 1 lakh crore to states.
Govt of India levies and collects the Cess and keeps it in “GST Compensation Fund” in Public Account of India (because it is not Govt. of India’s money and it belongs to States) and then it transfers to States/UTs.
Question 32. “Tax Buoyancy” in the economy is defined as:
Select the correct answer using the code given below:
- Ratio of percentage change in tax revenue to the percentage change in GDP
- Ratio of change in tax revenue to changes in GDP
- Percentage increase in tax revenues as measured from previous year
- Incremental change in tax revenues required to increase the GDP by one per cent
Select the correct answer using the code given below:
Answer: Option C. -> (i) only
Answer: (c)
Tax buoyancy = ${% \text"Change in Tax Revenue"}/{%\text"Change in Nominal GDP"}$
If nominal GDP growth is 12% and Tax revenue growth in a particular year is 15% then tax buoyancy will be 15%/12% = 1.25. It tells what is the growth in tax revenue with every percentage change in GDP.
If tax buoyancy is greater than one then it is good for the economy.
Answer: (c)
Tax buoyancy = ${% \text"Change in Tax Revenue"}/{%\text"Change in Nominal GDP"}$
If nominal GDP growth is 12% and Tax revenue growth in a particular year is 15% then tax buoyancy will be 15%/12% = 1.25. It tells what is the growth in tax revenue with every percentage change in GDP.
If tax buoyancy is greater than one then it is good for the economy.
Answer: Option D. -> 30%
Answer: (d)
Answer: (d)
Answer: Option D. -> Neither 1 nor 2
Answer: (d)
Agricultural income tax is levied on the income from Agriculture.
At present agriculture is subjected to – two direct taxes and they are Agricultural Income Tax and Land Tax.
They are levied by the state governments. Not all states levy agricultural income tax.
Answer: (d)
Agricultural income tax is levied on the income from Agriculture.
At present agriculture is subjected to – two direct taxes and they are Agricultural Income Tax and Land Tax.
They are levied by the state governments. Not all states levy agricultural income tax.
Question 35. Consider the following statements regarding the “Inverted Duty Structure” in international trade:
Select the correct answer using the code given below:
- It makes domestic manufactured goods less competitive against finished product imports in the domestic market.
- Finished goods are taxed at a higher rate than the raw materials
- Raw materials are taxed at a higher rate than the finished products
- This has reference to Customs Duty
Select the correct answer using the code given below:
Answer: Option D. -> (i), (iii) & (iv) only
Answer: (d)
When the import duty on raw materials is quite higher than the import duty on finished goods then it makes the domestic manufacturers less competitive because then traders start importing manufactured goods in the country rather than manufacturing the goods domestically.
India levies the highest duties on the import of raw rubber and one of the lowest duties on the import of finished rubber goods i.e. tyres. This has created an inverted duty structure.
Answer: (d)
When the import duty on raw materials is quite higher than the import duty on finished goods then it makes the domestic manufacturers less competitive because then traders start importing manufactured goods in the country rather than manufacturing the goods domestically.
India levies the highest duties on the import of raw rubber and one of the lowest duties on the import of finished rubber goods i.e. tyres. This has created an inverted duty structure.
Question 36. The term ‘Crowd-out’ in the economy is related to which of the following:
Select the correct answer using the code given below:
- Increased public sector spending replaces private sector spending
- Governments deficit spending through borrowed money leads to hardening of interest rates
- Government spending uses up financial resources that would otherwise be used by private firms
- Government providing a service or good that would otherwise be a business opportunity for private industry
Select the correct answer using the code given below:
Answer: Option D. -> All of the above
Answer: (d)
When the government borrows more, then there may be a decrease in private investment due to a reduction in the amount of savings available to the private sector.
This is because if the government decides to borrow from the private citizens by issuing bonds to finance deficits, these bonds (which are risk-free) compete with corporate bonds and other financial instruments for the available supply of funds.
If people decide to buy government bonds, the funds remaining to be invested in the private sector will be less.
Thus, some private/corporate borrowers will get "crowded out" of the financial markets as the government claims an increasing share of the economy's total savings.
This also increases the interest rate for the private sector.
Answer: (d)
When the government borrows more, then there may be a decrease in private investment due to a reduction in the amount of savings available to the private sector.
This is because if the government decides to borrow from the private citizens by issuing bonds to finance deficits, these bonds (which are risk-free) compete with corporate bonds and other financial instruments for the available supply of funds.
If people decide to buy government bonds, the funds remaining to be invested in the private sector will be less.
Thus, some private/corporate borrowers will get "crowded out" of the financial markets as the government claims an increasing share of the economy's total savings.
This also increases the interest rate for the private sector.
Answer: Option B. -> Sales tax and Excise tax
Answer: (b)
Answer: (b)
Answer: Option C. -> Value added Tax (VAT)
Answer: (c)MODVAT e.g. modified value added tax is related to Value added tax e.g. VAT.
Answer: (c)MODVAT e.g. modified value added tax is related to Value added tax e.g. VAT.
Answer: Option B. -> 2005
Answer: (b)
Answer: (b)
Answer: Option B. -> (ii), (iii) & (iv) only
Answer: (b)
Receipts under the Public Account account mainly flow from the sale of Savings Certificates, contributions into General Provident Fund, Public Provident Fund, Security Deposits and Earnest Money Deposits (a kind of security deposits) received by the government.
It also includes schemes like Kisan Vikas Patra, Sukanya Samridhi Scheme etc. In respect of such deposits, the government is acting as a Banker or Trustee and refunds the money after the completion of the contract/ event.
All government borrowings through Treasury bills and Dated securities go to the Consolidated Fund of India.
Answer: (b)
Receipts under the Public Account account mainly flow from the sale of Savings Certificates, contributions into General Provident Fund, Public Provident Fund, Security Deposits and Earnest Money Deposits (a kind of security deposits) received by the government.
It also includes schemes like Kisan Vikas Patra, Sukanya Samridhi Scheme etc. In respect of such deposits, the government is acting as a Banker or Trustee and refunds the money after the completion of the contract/ event.
All government borrowings through Treasury bills and Dated securities go to the Consolidated Fund of India.
Latest Videos
Latest Test Papers
Login With Google
Old way of Login
Login With Email