GST & Tax — Set 5

Correct Answer: C. France

France was the first country to implement GST (as VAT) in 1954. Since then, over 160 countries have adopted some form of a consumption-based tax. India followed a dual GST model similar to Canada and Brazil.

Correct Answer: A. Recommending the distribution of financial resources between Centre and States

The Finance Commission is a constitutional body that recommends how central tax revenues should be shared with states. It also suggests principles for grants-in-aid to states. It is appointed every five years by the President of India.

Correct Answer: A. GST

GST is an indirect tax because it is collected by the seller from the consumer and then paid to the government. The burden of the tax is shifted to the final user. Direct taxes like Wealth Tax and Gift Tax are paid directly by the person on whom they are levied.

Correct Answer: C. The entire value chain is tax-free, primarily for exports

Zero-rated supplies, such as exports and supplies to SEZs, are not taxed at the output stage, and the supplier can claim a refund of taxes paid on inputs. This makes Indian exports competitive in the international market. It is different from 'exempt supplies' where input tax credit cannot be claimed.

Correct Answer: A. 12%

The 12% and 18% rates are standard rates, but 12% is often viewed as a lower 'merit' rate for certain essential goods. Essential items are kept at 5%, while demerit or luxury goods are at 28%. The classification helps in balancing revenue and affordability.

Correct Answer: B. VAT (Value Added Tax)

The correct answer is 'VAT (Value Added Tax)'. At the state level, GST replaced several taxes including VAT, Entry Tax, Luxury Tax, and Entertainment Tax. This helped in creating a 'One Nation, One Tax' system. It removed the barriers of multiple state-level check posts.

Correct Answer: A. Illegal non-payment or underpayment of taxes

Tax evasion is the illegal practice of not paying taxes by deliberately misrepresenting or concealing income. It is a criminal offense punishable by fines and imprisonment. It leads to the generation of 'black money' in the economy.

Correct Answer: D. Revenue Secretary

The Revenue Secretary to the Government of India serves as the Ex-officio Secretary to the GST Council. They are responsible for the administrative work and coordination of the council's meetings. This role is crucial for implementing the council's decisions.

Correct Answer: B. Recipient of goods/services is liable to pay tax instead of the supplier

In a normal scenario, the supplier pays the tax, but under RCM, the liability to pay tax shifts to the person receiving the goods or services. This is often applied when goods are purchased from unregistered dealers. It ensures that tax is collected even when the supplier is in the informal sector.

Correct Answer: B. Everyone pays the same percentage of income as tax

A proportional tax, also known as a flat tax, applies the same tax rate to all taxpayers regardless of their income level. While it is simple to administer, it does not account for the different financial capacities of individuals. Corporate tax is often cited as an example of a proportional tax.