GST & Tax Structure — Set 14

Correct Answer: B. AAR rulings are binding only on the specific applicant in the state where it is obtained, not binding on all states

The Advance Ruling Authority (AAR) under GST provides binding rulings on specific tax questions for the applicant who sought the ruling, from the relevant state's AAR. The limitation is that AAR rulings are state-specific — the same question may get different rulings in different states. The National AAR (NAAR) for uniformity was proposed but not established. This inconsistency across states is a challenge.

Correct Answer: B. Central Excise credit on inputs for Excise Duty and Service Tax purposes

CENVAT (Central Value Added Tax) Credit was the pre-GST credit system under Central Excise Duty and Service Tax (both central taxes). It allowed manufacturers and service providers to claim credit for Excise Duty and Service Tax paid on inputs/services against their output Excise Duty/Service Tax liability. CENVAT credit was limited to central taxes and had restricted cross-credit. GST replaced CENVAT with a comprehensive ITC system.

Correct Answer: D. 18%

Gym memberships, fitness centre subscriptions, and sports club memberships attract 18% GST. These are classified as 'admission to entertainment events and amusement parks' or personal services. Healthcare services (treatment by certified medical practitioners) are exempt; fitness and recreational services are taxable at 18%.

Correct Answer: B. Invoice matching, GSTR-2B verification, e-invoicing, and ITC reversal on mismatch

The correct answer is Invoice matching, GSTR-2B verification, e-invoicing, and ITC reversal on mismatch. GST addresses fraudulent ITC claims through multiple mechanisms: (1) e-invoicing to authenticate invoices at source, (2) GSTR-2B auto-generated ITC statement that restricts ITC to supplier-uploaded invoices, (3) invoice matching between GSTR-1 (supplier) and GSTR-3B/ITC claimed (recipient), (4) Rule 86B limiting cash tax payment for high-risk taxpayers, and (5) anti-evasion provisions with criminal penalties for fake ITC claims. This topic is frequently tested in competitive examinations such as RRB NTPC, SSC, and UPSC.

Correct Answer: B. 18% for rent paid by registered persons for commercial residential accommodation

Residential rent is generally exempt from GST when rented to individuals for personal use. However, after October 2022, if a GST-registered person takes a residential property on rent for their business use (like accommodation of employees), 18% GST applies under Reverse Charge Mechanism (payable by the registered recipient). Non-commercial residential rentals remain exempt.

Correct Answer: C. 12%

Tractors and agricultural machinery generally attract 12% GST. This rate was set to balance agricultural support with revenue collection. Some farm equipment and implements (like hand-operated tools) attract 0% or 5% GST. The government has been under pressure to reduce GST on agricultural equipment to reduce farming costs.

Correct Answer: B. Local body tax on goods entering a city/municipal area

Octroi was a local body tax levied by municipalities, panchayats, and urban local bodies on goods entering their jurisdiction. It was a major impediment to inter-city trade and created long queues at Octroi check-posts, particularly in Maharashtra. GST replaced Octroi with its unified structure, eliminating these check-posts and improving logistics efficiency.

Correct Answer: B. 5%

Edible oils (groundnut oil, mustard oil, sunflower oil, coconut oil, palm oil, etc.) attract 5% GST. This low rate is set to keep essential cooking ingredients affordable for households. Some specialty oils or refined edible oils may attract 5-12% GST. The GST Council has consistently maintained the 5% rate on edible oils due to their essential nature.

Correct Answer: B. 6% flat rate GST for service providers under composition scheme (up to ₹50 lakh turnover)

Under the GST Composition Scheme for service providers (introduced in 2019), service providers (including both service and goods supply) with turnover up to ₹50 lakh per year can opt for a flat 6% GST (3% CGST + 3% SGST). They cannot collect GST from customers, cannot issue tax invoices, and cannot claim ITC. They file CMP-08 quarterly and GSTR-4 annually.

Correct Answer: B. 4 Central Acts (CGST, IGST, UTGST, GST Compensation to States)

For the implementation of GST at the Centre, 4 Central Acts were enacted: (1) CGST Act 2017, (2) IGST Act 2017, (3) UTGST Act 2017 (for Union Territories without legislature), and (4) GST (Compensation to States) Act 2017. Additionally, each state enacted its own SGST Act. This reflects GST's federal structure.