GST & Tax — Set 4

Correct Answer: A. Pure gifts to non-related persons without consideration

Supply is the taxable event in GST and generally requires 'consideration' (payment). Pure gifts without any business interest or consideration are usually not treated as supply. Barter and transfers are included because there is a mutual exchange of value.

Correct Answer: C. Systematic classification of goods globally

HSN stands for Harmonized System of Nomenclature, an internationally accepted method of classifying goods. It helps in maintaining uniformity in tax rates and data collection across different countries. Most businesses are required to mention HSN codes on their GST invoices.

Correct Answer: D. Sin Tax

A Sin Tax is an excise tax specifically levied on certain goods deemed harmful to society, like alcohol and tobacco. It serves the dual purpose of generating revenue and reducing consumption. In the GST regime, these items often attract the highest rate plus a compensation cess.

Correct Answer: D. Union Territories without a separate legislature

UTGST or Union Territory Goods and Services Tax is levied in Union Territories like Chandigarh and Ladakh which do not have their own state legislature. Delhi and Puducherry have their own legislatures, so they apply SGST. This ensures that every part of India is covered under the dual GST model.

Correct Answer: C. Using legal loopholes to minimize tax liability

Tax avoidance involves using legal methods and loopholes in the tax law to reduce the amount of tax owed. It is different from 'tax evasion', which is illegal and involves hiding income or falsifying data. While avoidance is technically legal, governments often introduce laws to curb aggressive tax planning.

Correct Answer: D. Total borrowing requirements of the government

Fiscal Deficit is the excess of total expenditure over total receipts excluding borrowings. it indicates the total amount of money the government needs to borrow to meet its expenses. A high fiscal deficit can lead to inflation and increased national debt.

Correct Answer: B. Simplifying GST returns and procedures

The correct answer is 'Simplifying GST returns and procedures'. Several expert committees and law committees under the GST Council focus on streamlining the complex filing process. They recommend changes to forms and rules to make it easier for small businesses to comply. This is part of the 'Ease of Doing Business' initiative in India.

Correct Answer: A. They declare no taxable transactions during the period

A Nil return is filed when there have been no sales or purchases during the relevant tax period. Even if there is no business activity, registered taxpayers must file this to stay compliant. Failure to file a Nil return can lead to late fees and penalties.

Correct Answer: C. Progressive Income Tax

A progressive income tax is based on the 'Ability to Pay' principle, where those with higher incomes pay a higher percentage in tax. This is intended to ensure social justice and reduce income inequality. Indirect taxes are less sensitive to this principle as everyone pays the same rate on a product.

Correct Answer: B. Rs. 50,000

An E-Way Bill is an electronic document generated on the GST portal for the movement of goods. It is mandatory for consignments valued over Rs. 50,000 in both inter-state and intra-state movements (though state rules may vary). It helps in tracking the movement of goods and preventing tax evasion.