GST & Tax Structure — Set 11

Correct Answer: D. Canada

India's dual GST model (Centre + States both levy GST) is most closely modeled after Canada's federal GST system, where both the federal government (GST) and provincial governments (PST/HST) levy GST. Australia's GST is a pure national model. India adopted the dual structure to preserve fiscal federalism while achieving tax unification — making India's GST unique globally as a dual federal GST.

Correct Answer: B. ₹20 lakh crore

India's annual GST collection crossed ₹20 lakh crore for FY 2023-24, with average monthly collections exceeding ₹1.68 lakh crore. This represents a massive increase from the initial months of GST when collections were around ₹90,000-95,000 crore per month. The growth reflects improving compliance, economic growth, and enhanced e-invoicing and technology-driven compliance.

Correct Answer: B. System where B2B invoices are authenticated by IRP (Invoice Registration Portal) and assigned IRN

E-invoicing under GST requires businesses (above certain turnover thresholds) to get their B2B invoices electronically authenticated by an Invoice Registration Portal (IRP). The IRP generates an Invoice Reference Number (IRN) and a QR code, which are embedded in the invoice. E-invoicing is mandatory for businesses with turnover above ₹5 crore (phased rollout). It reduces invoice fraud and improves ITC matching.

Correct Answer: B. Refund of excess tax paid, ITC accumulated due to exports/inverted duty structure, or wrong head payment

GST refund can be claimed in situations such as: excess tax paid due to mistake, ITC accumulated because of exports (zero-rated supplies), ITC accumulation due to inverted duty structure (input GST rate higher than output), supplies to SEZs, and payment of tax under wrong head (e.g., IGST paid instead of CGST+SGST). Refund applications are filed online and processed within 60 days.

Correct Answer: B. GST rate on inputs is higher than GST rate on finished goods, causing ITC accumulation

Inverted Duty Structure (IDS) occurs when the GST rate on inputs (raw materials) is higher than the GST rate on the finished goods produced from those inputs. This leads to ITC accumulation that cannot be fully utilized, creating a cash flow burden on manufacturers. For example, fabrics (12%) attract higher GST than garments (5%), causing IDS in the textile sector. Refunds are available for accumulated ITC due to IDS.

Correct Answer: B. Excise Duty (Centre), Service Tax (Centre), VAT/Sales Tax (States), CST, Entry Tax, Octroi

Before GST, India's indirect tax structure was fragmented with multiple taxes: Central Excise Duty (on manufacturing), Service Tax (on services) — both by Centre; and VAT/Sales Tax, Central Sales Tax (CST), Entry Tax, Octroi, Entertainment Tax, Luxury Tax, Advertisement Tax — by States. This fragmented system with different rates, rules, and compliance requirements across 29 states was a major impediment to 'ease of doing business'.

Correct Answer: B. 5%

Electric vehicles (EVs) attract 5% GST, reduced from 12% as part of the government's push for EV adoption in India. EV chargers and charging stations also attract 5% GST (reduced from 18%). This is part of the government's FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme to incentivize the EV ecosystem and reduce carbon emissions.

Correct Answer: B. Supplies made without consideration still treated as supply (related party, stock transfers, etc.)

Schedule I of the CGST Act lists transactions that are treated as 'supply' even without consideration: (1) permanent transfer of business assets, (2) supplies between related persons (except gifts below ₹50,000/year to employees), (3) agent-principal supplies without consideration, and (4) import of services by taxable person for personal use. These prevent tax avoidance through non-commercial transactions.

Correct Answer: B. 5%

Fertilizers attract 5% GST. This rate was set to balance agricultural support (keeping fertilizers affordable for farmers) with revenue collection. Before GST, fertilizers were subject to different state-level taxes creating inequities. The 5% rate applies to both chemical (NPK, Urea) and organic fertilizers sold through normal trade channels. Government-supplied subsidized fertilizers may have different treatment.

Correct Answer: C. Nil threshold — e-commerce sellers must register regardless of turnover

Persons who supply goods or services through e-commerce operators (like Amazon, Flipkart) are required to mandatorily register under GST regardless of their annual turnover. The normal threshold exemption (₹20 lakh/₹40 lakh) does not apply to e-commerce sellers. This ensures that even small sellers on e-commerce platforms comply with GST provisions.