GST & Tax Structure — Set 10

Correct Answer: B. Declaration of pre-GST tax credits (CENVAT, VAT) carried forward into GST regime

TRAN-1 (Transitional Credit form) was filed by taxpayers in the early months of GST (July 2017) to declare their pre-GST tax credits (CENVAT credit, VAT credit, etc.) and carry them forward as ITC under the new GST regime. This transition provision ensured that businesses did not lose the credit for taxes paid on pre-GST inventories. TRAN-1 filing was a major compliance exercise in the early GST period.

Correct Answer: B. July 1 — date of GST implementation in 2017

GST Day is celebrated on July 1 each year to mark the anniversary of the implementation of the Goods and Services Tax in India on July 1, 2017. The first GST Day was celebrated with much fanfare and the GST rollout was launched at a special midnight Parliament session in the Central Hall. GST Day is used to assess progress and announce reforms.

Correct Answer: B. Document issued by supplier when additional GST is to be charged over the original invoice

A Debit Note under GST is issued by a supplier to the recipient when the taxable value or tax charged in the original invoice is found to be less than what it should be. It increases the tax liability of the supplier. Debit notes must be reported in GSTR-1. Corresponding Credit Notes may be issued by the recipient in their books of account.

Correct Answer: B. Return filed by Input Service Distributor (ISD)

GSTR-6 is the monthly return filed by an Input Service Distributor (ISD). In GSTR-6, the ISD details the invoices received from suppliers, the ITC received from them, and how the ITC has been distributed to the registered branches of the business. GSTR-6 must be filed by the 13th of the following month.

Correct Answer: C. By November 30 of the year following the relevant financial year (or annual return filing, whichever is earlier)

Under the CGST Act, ITC must be availed (declared in returns) by the earlier of: November 30 following the end of the financial year to which the invoice relates, OR the date of filing the annual return (GSTR-9). This time limit was introduced to prevent delayed ITC claims and encourage timely reconciliation. Late ITC claims beyond this limit are disallowed.

Correct Answer: B. Services between branches of the same company (different GSTINs) are taxable under GST

Under GST, transactions between distinct persons — branches of the same company having separate GSTIN registrations in different states — are treated as supply even if no consideration is charged. This means if a head office (in Delhi) provides services to a branch (in Mumbai), it is a taxable supply under GST, and GST must be paid. This principle prevents tax avoidance through intra-company transfers.

Correct Answer: B. Commissioner of CGST/SGST (Appeals)

The first appeal against an order of the adjudicating authority under GST lies before the Commissioner (Appeals) — who is the first appellate authority. If the taxpayer is not satisfied with the Commissioner (Appeals) order, they can appeal to the GST Appellate Tribunal (GSTAT). The second appeal from GSTAT goes to the High Court.

Correct Answer: B. 5%

Economy class air travel attracts 5% GST (Input Tax Credit not available). Business class air travel attracts 12% GST. Before GST, service tax was applicable on air tickets. The 5% rate for economy class is intended to keep air travel relatively affordable while ensuring revenue collection. International air travel is zero-rated (as it's treated as an export of service).

Correct Answer: A. 0.25%

Rough diamonds and semi-precious stones attract 0.25% GST — a special low rate designed to support India's gem and jewellery export industry. Polished diamonds attract 1.5% GST. Cut and polished diamonds attract 1.5%. India is the world's largest diamond cutting and polishing centre, and these special rates are designed to maintain India's competitive advantage in the global diamond trade.

Correct Answer: B. GST unified multiple indirect taxes into one comprehensive tax across India

'One Nation, One Tax' is the guiding principle of GST — it replaced 17 fragmented indirect taxes with a single, comprehensive tax applicable across India. This created a unified national market, simplified compliance (one registration for multiple states under a single GST number was not introduced, but the framework is unified), reduced cascading, and brought transparency. It represents a landmark economic reform.