GST & Tax — Set 6

Correct Answer: A. 15

A GSTIN is a unique 15-digit identification number assigned to every registered taxpayer. The first two digits represent the state code, and the next ten digits are the PAN of the business. It helps in the easy tracking of tax compliance and transactions.

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

Cess is a form of tax levied over and above the basic tax for a specific objective, like education or health. Unlike normal taxes, the revenue from a cess must be spent only on the purpose for which it was collected. For example, the GST Compensation Cess is used to compensate states for revenue loss.

Correct Answer: B. Corporation Tax

Corporation Tax is a direct tax on the profits of companies and is one of the largest revenue sources for the Union. It is governed by the Income Tax Act. Stamp duty and Octroi are generally under the state or local government's jurisdiction.

Correct Answer: A. Personal consumption items

Input Tax Credit can only be claimed for goods and services used in the course or furtherance of business. Taxes paid on items for personal use or staff welfare (like food/beverages) are generally blocked from credit. This ensures that the credit system is not misused for non-business purposes.

Correct Answer: D. One-half of total members

One-half of the total number of members of the GST Council constitutes the quorum for its meetings. This ensures that a significant representation is present before any decisions are made. The council meets periodically to discuss rate changes and policy updates.

Correct Answer: C. GST

GST is essentially a tax on value addition, as businesses only pay tax on the difference between their sales and their purchases. The end consumer bears the tax on the full value of the product. This makes the system more transparent and efficient.

Correct Answer: A. April 1 to March 31

In India, the financial year or fiscal year begins on April 1st and ends on March 31st of the following year. All budget proposals and tax assessments follow this cycle. This is different from the calendar year used for general purposes.

Correct Answer: A. Luxury cars

Demerit goods are products whose consumption is considered unhealthy or socially undesirable, like luxury cars, tobacco, and aerated drinks. These items are placed in the 28% slab and often carry an additional compensation cess. This helps in discouraging their use while generating high revenue.

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

A surcharge is an additional tax levied on the existing tax liability, usually for high-income individuals or profitable companies. Unlike a cess, the revenue from a surcharge goes into the general pool and can be used for any purpose. It makes the tax system more progressive.

Correct Answer: B. Tax Shifting

Tax shifting occurs when the person on whom the tax is levied (producer) passes the burden to someone else (consumer) by increasing the price. In indirect taxes, shifting is common. The final person who cannot shift it further bears the 'Tax Incidence'.