GST & Tax Structure — Set 13

Correct Answer: B. State Government collects SGST on intra-state supplies

SGST (State Goods and Services Tax) is levied and collected by the State Government on intra-state (within the same state) supply of goods and services. It is charged alongside CGST on the same transaction for intra-state supplies. The rate of SGST is generally equal to CGST. All SGST revenue goes to the respective State Government's coffers.

Correct Answer: B. States derive significant revenue from alcohol excise and GST inclusion would reduce state autonomy

Alcohol for human consumption was kept outside GST primarily because State Excise Duty on alcohol is a major source of independent revenue for states (typically 10-20% of a state's own revenue). Including alcohol in GST would transfer this control to the Centre and reduce states' fiscal autonomy. This was a key political and fiscal consideration during GST negotiations.

Correct Answer: D. 28%

Lottery tickets attract 28% GST — one of the highest rates applicable to services. Lotteries run by state governments attract 28% GST on face value. This high rate reflects the government's policy of taxing lottery (a form of gambling) at the highest rate as a demerit good. The Compensation Cess may also be applicable over and above 28%.

Correct Answer: C. 18%

Non-Fungible Tokens (NFTs) are generally classified as goods or services for GST purposes and attract 18% GST (as digital supply of goods or services). The online gaming amendment (28% on online gaming from Oct 2023) has created some ambiguity for NFT-based gaming. The tax treatment of emerging digital assets remains an evolving area of GST jurisprudence.

Correct Answer: B. Centre's guarantee of 14% annual revenue growth to states, funded by Compensation Cess for 5 years (2017-2022), extended further

The GST Compensation framework guaranteed states a 14% annual growth in GST revenues for 5 years (2017-2022), funded by the Compensation Cess levied on sin/luxury goods. Due to COVID-19, GST revenues fell below the guaranteed level. The Centre borrowed to pay compensation to states during 2020-22. The Compensation Cess collection period was extended beyond June 2022 to repay these loans.

Correct Answer: B. Transaction value — actual price paid (with certain additions like taxes, freight, and deductions for discounts)

The 'value of supply' under GST is primarily the transaction value — the actual price paid or payable by the recipient for the supply. To this are added: incidental expenses charged to the recipient, government duties/taxes (other than GST), and any amount the supplier is legally liable to pay but charged to the recipient. Discounts given before/at the time of supply can be deducted if reflected in the invoice.

Correct Answer: C. Nil for recognized educational institutions; 18% for non-recognized educational services

Educational services provided by entities that are part of the 'educational institution' as defined under GST (schools, colleges, and universities recognized by the government or affiliated to recognized universities) are exempt (Nil rated). However, private coaching centres, private testing services, and non-recognized educational services attract 18% GST. There is constant pressure to expand the education GST exemption.

Correct Answer: C. 18% as digital goods/services supply

The GST treatment of cryptocurrencies and Virtual Digital Assets (VDAs) is not specifically notified. Transactions in VDAs (like Bitcoin, Ethereum) are likely classified as supply of goods or services attracting 18% GST. However, exchanges and VDA service providers charge 18% GST on their fees/commissions. This area is evolving as the government finalizes its digital asset taxation framework.

Correct Answer: B. Return filed by e-commerce operators for TCS collected at source

GSTR-8 is the monthly return filed by e-commerce operators (like Amazon, Flipkart, Meesho) who are required to collect Tax Collected at Source (TCS) under GST. In GSTR-8, the e-commerce operator reports the total value of taxable supplies made through their platform by suppliers/sellers, and the TCS collected. GSTR-8 is filed by the 10th of the following month.

Correct Answer: B. State-level tax on entry of goods into a state/city/municipality

Entry Tax was a state-level tax levied on goods entering a state, city, or local body jurisdiction from another state or place. It was similar to Octroi. Entry Tax created significant impediments to inter-state movement of goods and logistics inefficiencies. GST replaced Entry Tax, Octroi, and other such local body taxes, creating seamless movement of goods across state borders.