The Jan 6th Static Quiz on Economy 2021 (Taxation)
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The Jan 6th Static Quiz on Economy 2021 (Taxation)
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- Question 1 of 10
1. Question
Which of the following statements are correctly matched?
1. Progressive Tax = is a tax imposed so that the tax rate is fixed, with no change as the taxable base amount increases or decreases.
2. Regressive Tax = is a tax in which the tax rate increases as the taxable amount increases.
3. Proportional Tax= is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases.
CorrectAns; – d) None of the above
Explanation; –
· All are incorrectly matched
About Proportional Tax
· A proportional tax is a tax imposed so that the tax rate is fixed, with no change as the taxable base amount increases or decreases. The amount of the tax is in proportion to the amount subject to taxation.
About Regressive Tax
· A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. “Regressive” describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, so that the average tax rate exceeds the marginal tax rate.
About Progressive Tax
· A progressive tax is a tax in which the tax rate increases as the taxable amount increases. The term progressive refers to the way the tax rate progresses from low to high, with the result that a taxpayer’s average tax rate is less than the person’s marginal tax rate.
IncorrectAns; – d) None of the above
Explanation; –
· All are incorrectly matched
About Proportional Tax
· A proportional tax is a tax imposed so that the tax rate is fixed, with no change as the taxable base amount increases or decreases. The amount of the tax is in proportion to the amount subject to taxation.
About Regressive Tax
· A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. “Regressive” describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, so that the average tax rate exceeds the marginal tax rate.
About Progressive Tax
· A progressive tax is a tax in which the tax rate increases as the taxable amount increases. The term progressive refers to the way the tax rate progresses from low to high, with the result that a taxpayer’s average tax rate is less than the person’s marginal tax rate. - Question 2 of 10
2. Question
Which of the following are the direct taxes in India?
1. Sales Tax
2. Capital Gains Tax
3. Corporate TaxCorrectAns; – b) Only 2 and 3
Explanation; –
• As question asked Direct Tax the 1st one i.e. sales Tax is Indirect Tax that’s why answer is B.About Direct Tax in India
• A direct tax can be defined as a tax that is paid directly by an individual or organization to the imposing entity (generally government).
• A direct tax cannot be shifted to another individual or entity.
• The individual or organization upon which the tax is levied is responsible for the fulfillment of the tax payment.
• The Central Board of Direct Taxes deals with matters related to levying and collecting Direct Taxes and formulation of various policies related to direct taxes.
• A taxpayer pays a direct tax to a government for different purposes, including real property tax, personal property tax, income tax or taxes on assets, FBT, Gift Tax, Capital Gains Tax, etc.About Indirect Taxes in India
• An indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax. The intermediary later files a tax return and forwards the tax proceeds to government with the return.
• There are 7 main types of indirect taxes in India.
However, after the implementation of GST, these taxes are streamlined into one singular tax to reduce hassles of compliance.
IncorrectAns; – b) Only 2 and 3
Explanation; –
• As question asked Direct Tax the 1st one i.e. sales Tax is Indirect Tax that’s why answer is B.About Direct Tax in India
• A direct tax can be defined as a tax that is paid directly by an individual or organization to the imposing entity (generally government).
• A direct tax cannot be shifted to another individual or entity.
• The individual or organization upon which the tax is levied is responsible for the fulfillment of the tax payment.
• The Central Board of Direct Taxes deals with matters related to levying and collecting Direct Taxes and formulation of various policies related to direct taxes.
• A taxpayer pays a direct tax to a government for different purposes, including real property tax, personal property tax, income tax or taxes on assets, FBT, Gift Tax, Capital Gains Tax, etc.About Indirect Taxes in India
• An indirect tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax. The intermediary later files a tax return and forwards the tax proceeds to government with the return.
• There are 7 main types of indirect taxes in India.
However, after the implementation of GST, these taxes are streamlined into one singular tax to reduce hassles of compliance. - Question 3 of 10
3. Question
Which of the following taxation terms are correctly matched?
1. Tax Elasticity = is an indicator to measure efficiency and responsiveness of revenue mobilization in response to growth in the Gross domestic product or National income.
2. Tax Buoyancy = refers to changes in tax revenue in response to changes in tax rate.CorrectAns; – d) None of the above
Explanation; –
· Both the statemensts are incorrectly matched.
About Tax Elasticity
· Tax elasticity refers to changes in tax revenue in response to changes in tax rate.
About Tax Buoyancy
· Tax buoyancy is one of the key indicators to assess the efficiency of a government’s tax system.
· Generally, as the economy achieves faster growth, the tax revenue of the government also goes up.
· Tax buoyancy explains this relationship between the changes in government’s tax revenue growth and the changes in GDP.
· In other words, it measures the responsiveness of tax mobilization to economic growth.
· Tax buoyancy depends largely on; –
1. the size of the tax base
2. the friendliness of the tax administration
3. the reasonableness and simplicity of the tax ratesIncorrectAns; – d) None of the above
Explanation; –
· Both the statemensts are incorrectly matched.
About Tax Elasticity
· Tax elasticity refers to changes in tax revenue in response to changes in tax rate.
About Tax Buoyancy
· Tax buoyancy is one of the key indicators to assess the efficiency of a government’s tax system.
· Generally, as the economy achieves faster growth, the tax revenue of the government also goes up.
· Tax buoyancy explains this relationship between the changes in government’s tax revenue growth and the changes in GDP.
· In other words, it measures the responsiveness of tax mobilization to economic growth.
· Tax buoyancy depends largely on; –
1. the size of the tax base
2. the friendliness of the tax administration
3. the reasonableness and simplicity of the tax rates - Question 4 of 10
4. Question
Which of the following statements best describes Tax incidence?
1. is an economic term for understanding the division of a tax burden between stakeholders, such as buyers and sellers or producers and consumer’s.
2. Tax incidence can also be related to the price elasticity of supply and demand.CorrectAns; – c) Both 1 and 2
Explanation; –
• Both the statements are correct about Tax Incidence.
• Tax incidence (or incidence of tax) is an economic term for understanding the division of a tax burden between stakeholders, such as buyers and sellers or producers and consumers.
• Tax incidence is the study of who bears the burden of tax.
• Regardless of who pays the tax directly to the govt. buyers and sellers both bear some of the tax incidence.
• Tax incidence can also be related to the price elasticity of supply and demand.
IncorrectAns; – c) Both 1 and 2
Explanation; –
• Both the statements are correct about Tax Incidence.
• Tax incidence (or incidence of tax) is an economic term for understanding the division of a tax burden between stakeholders, such as buyers and sellers or producers and consumers.
• Tax incidence is the study of who bears the burden of tax.
• Regardless of who pays the tax directly to the govt. buyers and sellers both bear some of the tax incidence.
• Tax incidence can also be related to the price elasticity of supply and demand.
- Question 5 of 10
5. Question
With reference to India’s decision to levy an equalization tax of 6% on online advertisement services offered by non-resident entities, which of the following statements is/are correct? (UPSC Pre18 Set-D)
1. It is introduced as a part of the Income Tax Act.
2. Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the “Double Taxation Avoidance Agreements”.
Select the correct answer using the code given below:CorrectAns;- d) Neither 1 nor 2
Explanation;-
• Both the statements are incorrect
• The Equalization Levy was introduced in 2016 on business transaction for online marketing in which any Indian pays a sum of more than 1 lakh to non-residents entities such as google and Facebook etc.,
• As the levy was not introduced as part of the Income Tax Act but as a separate legislation under the Finance Bill, global firms that offer such services in india cannot claim a tax credit in their home country the double taxation avoidance agreement .IncorrectAns;- d) Neither 1 nor 2
Explanation;-
• Both the statements are incorrect
• The Equalization Levy was introduced in 2016 on business transaction for online marketing in which any Indian pays a sum of more than 1 lakh to non-residents entities such as google and Facebook etc.,
• As the levy was not introduced as part of the Income Tax Act but as a separate legislation under the Finance Bill, global firms that offer such services in india cannot claim a tax credit in their home country the double taxation avoidance agreement . - Question 6 of 10
6. Question
Which of the following statements about Direct taxes are correct?
1. The incidence and impact of the direct tax fall on the same person.
2. The direct tax is regressive in nature
3. Income Tax, Corporation Tax and Wealth Tax are direct taxes
CorrectAns; – c) Only 1 and 3
Explanation; –
• The 2nd statement is incorrect because Direct taxes are progressive in nature.
About Direct Taxes
• The tax that is levied by the government directly on the individuals or corporations are called Direct Taxes.
• The incidence and impact of the direct tax fall on the same person.
• Income Tax, Corporation Tax and Wealth Tax are direct taxes
• They are progressive in nature.
• Both Social and Economical. Social objective of direct tax is the distribution of income. A person earning more should contribute more in the provision of public service by paying more tax. This provision is also known as progressive taxation.
• Not at all Inflationary the Direct tax.
IncorrectAns; – c) Only 1 and 3
Explanation; –
• The 2nd statement is incorrect because Direct taxes are progressive in nature.
About Direct Taxes
• The tax that is levied by the government directly on the individuals or corporations are called Direct Taxes.
• The incidence and impact of the direct tax fall on the same person.
• Income Tax, Corporation Tax and Wealth Tax are direct taxes
• They are progressive in nature.
• Both Social and Economical. Social objective of direct tax is the distribution of income. A person earning more should contribute more in the provision of public service by paying more tax. This provision is also known as progressive taxation.
• Not at all Inflationary the Direct tax.
- Question 7 of 10
7. Question
The sales tax you pay while purchasing a toothpaste is a (UPSC Pre 2014)
CorrectAns;- d) tax imposed and collected by the State Government
Explanation;-
• Taxes on toothpaste come under CST Act , which is administered by State Government. Sales Tax is paid to the Sales Tax Authority in the state from where the goods are moved, i.e. the state from where the movement of goods begin.IncorrectAns;- d) tax imposed and collected by the State Government
Explanation;-
• Taxes on toothpaste come under CST Act , which is administered by State Government. Sales Tax is paid to the Sales Tax Authority in the state from where the goods are moved, i.e. the state from where the movement of goods begin. - Question 8 of 10
8. Question
Which of the following statements about Indirect Taxes are correct?
1. The tax that is levied by the government on one entity (Manufacturer of goods), but is passed on to the final consumer by the manufacturer.
2. The incidence and impact of the tax fall on different persons.
3. They are regressive in nature.CorrectAns;- d) All of the above
Explanation;-
• All of the statements are indirect taxes are correct.About Indirect Taxes
• The tax that is levied by the government on one entity (Manufacturer of goods), but is passed on to the final consumer by the manufacturer.
• The incidence and impact of the tax fall on different persons.
• VAT, Service tax, GST, Excise duty, entertainment tax and Customs Duty.
• They are regressive in nature.
• When an indirect tax is levied on a product, both rich and poor must pay at the same rate. A person earning 10 lakh a month pays the same tax on the Wheat purchase as the person earning 3000 Re a month. This principle is called regressive taxation.
• The Indirect tax is inflationaryIncorrectAns;- d) All of the above
Explanation;-
• All of the statements are indirect taxes are correct.About Indirect Taxes
• The tax that is levied by the government on one entity (Manufacturer of goods), but is passed on to the final consumer by the manufacturer.
• The incidence and impact of the tax fall on different persons.
• VAT, Service tax, GST, Excise duty, entertainment tax and Customs Duty.
• They are regressive in nature.
• When an indirect tax is levied on a product, both rich and poor must pay at the same rate. A person earning 10 lakh a month pays the same tax on the Wheat purchase as the person earning 3000 Re a month. This principle is called regressive taxation.
• The Indirect tax is inflationary - Question 9 of 10
9. Question
Which one of the following is not a feature of “Value Added Tax”? (UPSC Pre 2011)
CorrectAns;- d) It is basically a subject of the Central Government and the State Governments are only a facilitator for its successful implementation
Explanation;-
• The statement d is not a feature of VAT
• The value added tax was introduced as a n indirect tax into the Indian taxation system from April 1 2005.
• The existing general sales tax laws were replaced with the Value Added Tax Act 2005 and associated VAT rules.
• Haryana became the first state in the country that adopted the taxation on April 1 2003.
• As of 2 june 2014 , VAT has been implemented in all the states and Union territories of india.
VAT is for sates and CENVAT is for centre.IncorrectAns;- d) It is basically a subject of the Central Government and the State Governments are only a facilitator for its successful implementation
Explanation;-
• The statement d is not a feature of VAT
• The value added tax was introduced as a n indirect tax into the Indian taxation system from April 1 2005.
• The existing general sales tax laws were replaced with the Value Added Tax Act 2005 and associated VAT rules.
• Haryana became the first state in the country that adopted the taxation on April 1 2003.
• As of 2 june 2014 , VAT has been implemented in all the states and Union territories of india.
VAT is for sates and CENVAT is for centre. - Question 10 of 10
10. Question
Which of the following statements regarding GST are correct?
1. Goods and Services Tax (GST) is an indirect tax (or consumption tax) used in India on the supply of goods and services.
2. The tax came into effect from 1 July 2016 through the implementation of the One Hundred and First Amendment of the Constitution of India by the Indian government. The GST replaced existing multiple taxes levied by the central and state governments.CorrectAns;- a) Only 1
Explanation;-
• The 2nd statement is incorrect because GST amended in 2017 not 2016.
About GST
• It is a destination-based taxation system.
• It has been established by the 101st Constitutional Amendment Act.
• It is an indirect tax for the whole country on the lines of “One Nation One Tax” to make India a unified market.
• It is a single tax on supply of Goods and Services in its entire product cycle or life cycle i.e. from manufacturer to the consumer.
• It is calculated only in the “Value addition” at any stage of a goods or services.
• The final consumer will pay only his part of the tax and not the entire supply chain which was the case earlier.
• There is a provision of GST Council to decide upon any matter related to GST whose chairman in the finance minister of India.
IncorrectAns;- a) Only 1
Explanation;-
• The 2nd statement is incorrect because GST amended in 2017 not 2016.
About GST
• It is a destination-based taxation system.
• It has been established by the 101st Constitutional Amendment Act.
• It is an indirect tax for the whole country on the lines of “One Nation One Tax” to make India a unified market.
• It is a single tax on supply of Goods and Services in its entire product cycle or life cycle i.e. from manufacturer to the consumer.
• It is calculated only in the “Value addition” at any stage of a goods or services.
• The final consumer will pay only his part of the tax and not the entire supply chain which was the case earlier.
• There is a provision of GST Council to decide upon any matter related to GST whose chairman in the finance minister of India.
