GST & Tax Structure — Set 12

Correct Answer: B. Quarterly Return with Monthly Payment for taxpayers under ₹5 crore turnover

The QRMP (Quarterly Return, Monthly Payment) scheme allows taxpayers with annual turnover up to ₹5 crore to file GSTR-1 and GSTR-3B quarterly (instead of monthly), while making GST payments monthly using Form PMT-06 for the first two months of the quarter. This reduces the number of returns filed annually from 24 (for monthly filers) to 8, significantly reducing compliance burden.

Correct Answer: C. Suppliers whose invoices are blocked in GSTR-2B for ITC as they have been suspended or cancelled

Under GST, if a supplier's registration is suspended or cancelled, their invoices get blocked in the GSTR-2B system, meaning buyers cannot claim ITC on purchases from such suppliers. This is sometimes informally called 'blacklisting'. The mechanism protects revenue by preventing ITC flow from non-compliant suppliers.

Correct Answer: B. IGST paid by the Indian recipient on services received from foreign service providers

Under GST, import of services by a person in India from a foreign service provider is taxable under Reverse Charge Mechanism (RCM). The Indian recipient of such services is liable to pay IGST on the import of services, even if the foreign supplier is not registered in India. The recipient can subsequently claim ITC on this RCM payment, subject to normal ITC conditions.

Correct Answer: B. Destination-based — tax goes to the consuming state

India's GST follows the destination principle — GST revenue flows to the state where goods/services are finally consumed, not where they are produced. Under IGST, the tax is first collected by the Centre from the exporting state and then credited to the importing (destination) state. This shift from origin-based (CST) to destination-based (GST) taxation is a fundamental change.

Correct Answer: B. Quasi-judicial body providing advance tax rulings on classification, rate, and ITC applicability

The Authority for Advance Rulings (AAR) under GST allows taxpayers to seek clarity on specific tax questions (classification of goods/services, applicable GST rate, ITC eligibility) before making a supply or business decision. AAR rulings are binding on the applicant and the GST authorities for that specific applicant. They reduce uncertainty and litigation by providing upfront guidance.

Correct Answer: B. Return of Tax Deducted at Source (TDS) under GST, filed by TDS deductors

GSTR-7 is the monthly return filed by persons who are required to deduct TDS (Tax Deducted at Source) under GST (Section 51 of CGST Act). TDS deductors include government departments, PSUs, and local authorities. GSTR-7 contains details of TDS deducted, the TDS paid to government, and the TDS refunds, if any. It must be filed by the 10th of the following month.

Correct Answer: D. End Consumer

Under GST, the final incidence of tax falls on the end consumer who is not registered under GST (and therefore cannot claim ITC). All registered businesses in the supply chain use the ITC mechanism to pass the tax burden forward. The consumer, being the last in the chain, bears the full tax cost. This is why GST is described as a consumption-based tax.

Correct Answer: C. 12%

Readymade garments and textile products valued above ₹1,000 attract 12% GST. Garments valued at or below ₹1,000 attract 5% GST. Fabrics (woven/knitted) attract 5% GST, but this creates an inverted duty structure as garments attract 12%, which is higher than the 5% on fabrics. The GST Council has discussed rationalization of textile GST rates.

Correct Answer: B. Milestone marking GST Council's sustained functioning and multiple rate rationalizations since 2016

The 50th GST Council meeting held in July 2023 was a significant milestone demonstrating the sustained and productive functioning of the Council since its first meeting in September 2016. The Council had by then resolved numerous GST rate rationalization issues, addressed COVID-related exemptions, dealt with the online gaming GST issue, and managed the compensation cess transition.

Correct Answer: B. Indirect tax — paid by business but ultimately borne by consumer through price

GST is an indirect tax — it is levied on the supply of goods and services, and while businesses collect and deposit it with the government, the economic burden is ultimately borne by the final consumer through higher prices. The distinction from direct taxes (like Income Tax) is that the person paying the tax (the supplier) and the person bearing the burden (the consumer) are different.