GST & Tax — Set 6

Correct Answer: A. 15

• **15** = A GSTIN is a unique 15-digit identification number assigned to every registered GST taxpayer. • **State code + PAN structure** — The first two digits represent the state code, the next ten digits are the PAN of the business, and the remaining three are check digits. • 💡 Wrong-option analysis: 10: 10 digits is the length of a PAN number, not a GSTIN; 16: a GSTIN has 15 digits, not 16; 12: 12 digits is the length of an Aadhaar number, not a GSTIN.

Correct Answer: C. A tax on tax levied for a specific purpose

• **A tax on tax levied for a specific purpose** = Cess is a form of tax levied over and above the basic tax, earmarked for a specific objective like education or health. • **Revenue must be used only for its purpose** — Unlike normal taxes, cess revenue must be spent exclusively on the purpose for which it was collected. • 💡 Wrong-option analysis: A permanent direct tax: cess is a temporary, purpose-specific levy, not a permanent direct tax; A discount on tax: a cess is an additional levy on top of the base tax, not a reduction; A tax levied only by states: cess is primarily levied by the Centre, not restricted to states.

Correct Answer: B. Corporation Tax

• **Corporation Tax** = Corporation Tax is a direct tax on the profits of companies and one of the largest sources of central revenue. • **Governed by Income Tax Act** — It is levied under the Income Tax Act, 1961, and is collected by the Central Board of Direct Taxes (CBDT). • 💡 Wrong-option analysis: Customs Duty: customs duty is an indirect tax on imports, not a direct tax; Stamp Duty: stamp duty is a state-level tax on legal documents; Octroi: octroi was a local-level indirect tax on goods entering a municipality.

Correct Answer: A. Personal consumption items

• **Personal consumption items** = Input Tax Credit cannot be claimed for goods and services used for personal consumption or non-business purposes. • **Blocked credits include food and beverages** — Taxes paid on items like food, beverages, or goods for personal use are 'blocked credits' under GST. • 💡 Wrong-option analysis: Raw materials: ITC is fully available for raw materials used in the production of taxable goods; Capital goods: ITC can be claimed for capital goods used in business; Services used for business: ITC is available for services purchased for business purposes.

Correct Answer: D. One-half of total members

• **One-half of total members** = One-half of the total number of members of the GST Council constitutes the quorum for its meetings. • **Ensures significant representation** — This quorum requirement ensures adequate state and central representation before any policy decisions are made. • 💡 Wrong-option analysis: Two-thirds of total members: this is the majority required to pass a resolution in the GST Council, not the quorum; One-fourth of total members: one-fourth is too small a quorum for a body making major tax decisions; Three-fourths of total members: three-fourths is required for certain specific decisions but is not the general quorum.

Correct Answer: C. GST

• **GST** = GST is a tax on value addition because businesses pay tax only on the difference between their sales value and their purchase value. • **End consumer bears full tax** — While tax is collected at each stage, the full burden of GST ultimately rests with the final consumer. • 💡 Wrong-option analysis: Poll Tax: a poll tax is a fixed amount per person, with no relation to value addition; Professional Tax: professional tax is levied by states on income from professions and employment; Income Tax: income tax is levied on total income, not on value addition in the production chain.

Correct Answer: A. April 1 to March 31

• **April 1 to March 31** = In India, the financial year or fiscal year begins on 1 April and ends on 31 March of the following year. • **Budget proposals follow this cycle** — All Union Budget proposals, tax assessments, and GST annual return filings follow this April-March cycle. • 💡 Wrong-option analysis: October 1 to September 30: this is the fiscal year of the USA, not India; July 1 to June 30: this is not the Indian fiscal year, though GST was launched on 1 July 2017; January 1 to December 31: this is the calendar year, not the Indian fiscal year.

Correct Answer: A. Luxury cars

• **Luxury cars** = Luxury cars are demerit goods that attract the highest 28% GST slab plus an additional compensation cess. • **28% slab plus cess** — Items like tobacco, aerated drinks, and luxury vehicles are placed in the 28% slab and carry an additional compensation cess. • 💡 Wrong-option analysis: Solar panels: solar panels attract a lower GST rate as they are part of the renewable energy sector; Life-saving drugs: life-saving drugs are either exempt or placed in the lowest slab; Books: books are exempt from GST.

Correct Answer: B. An additional tax on the tax amount itself

• **An additional tax on the tax amount itself** = A surcharge is an additional levy on the existing tax liability, usually applied to high-income individuals or highly profitable companies. • **Goes into general consolidated pool** — Unlike cess, surcharge revenue is not earmarked for any specific purpose and goes into the Consolidated Fund of India. • 💡 Wrong-option analysis: A fine for late filing: a late filing penalty is a different concept, not a surcharge; A refund of tax: surcharge is an additional levy, not a refund; A tax on exports: customs duties apply to imports, and surcharge is not specific to exports.

Correct Answer: B. Tax Shifting

• **Tax Shifting** = Tax shifting occurs when the person on whom the tax is formally levied (producer) passes the burden to someone else (consumer) by raising the price. • **Common in indirect taxes** — In indirect taxes like GST, shifting is the norm as the tax is built into the final price paid by the consumer. • 💡 Wrong-option analysis: Tax Impact: tax impact refers to the point where the tax is initially imposed, on the producer or seller; Tax Buoyancy: tax buoyancy measures how tax revenue responds to GDP growth; Tax Incidence: tax incidence refers to who ultimately bears the economic burden of the tax, which is the endpoint of tax shifting.