Question

Goods & Services Tax (GST) is which of the following type of tax?

• A. Destination Based Tax
• B. Direct Tax
• C. Local Tax
• D. Lump Sum Tax
• A. Destination Based Tax
• B. Unified Tax
• C. Input Tax Credit (ITC)
• D. Unified Market
• A. All Central taxes
• B. All State taxes
• C. Large number of central and state indirect taxes
• D. Large number of central direct taxes
• A. Gold
• B. Silver
• C. Luxury Consumables
• D. Tobacco
• A. Because it is combination of multiple taxes.
• B. Because now country have only GST as indirect tax.
• C. Because it brought uniformity in tax rate across the country.
• D. Because it is a simple tax.

Answer 1

The Correct Option is A

Step 1: Recall the definition of GST.
GST is defined as a destination-based consumption tax. This means the tax revenue accrues to the state where the goods or services are consumed, not where they are produced.
Step 2: Differentiate between tax types.
- Destination Based Tax: Tax levied at the place of consumption. This matches GST’s structure.
- Direct Tax: Levied directly on income or wealth (e.g., income tax). GST is not a direct tax.
- Local Tax: Levied by local bodies like municipalities (e.g., property tax). GST is a national-level indirect tax, not local.
- Lump Sum Tax: A fixed tax irrespective of income or output. GST is value-added and not lump sum.
Step 3: Conclusion.
Since GST applies at the place of consumption and is designed as a value-added indirect tax, it is rightly categorized as a destination-based tax.
Final Answer: \[ \boxed{\text{Destination Based Tax}} \]

Answer 2

Step 1: Recall the meaning of cascading effect.
The cascading effect, also called "tax on tax," occurs when a product is taxed multiple times at different stages of production and distribution, without credit for taxes paid earlier.
Step 2: How GST addresses cascading.
GST removes cascading by introducing the Input Tax Credit (ITC) mechanism. Under ITC, businesses can set off the tax paid on inputs against the tax payable on output, ensuring tax is only paid on the value addition at each stage.
Step 3: Evaluating the options.
- (A) Destination Based Tax: Defines where the tax revenue goes, not about cascading.
- (B) Unified Tax: Refers to integration of multiple taxes, but not directly the reason cascading is removed.
- (C) Input Tax Credit (ITC): Correct. ITC is the mechanism that directly eliminates cascading.
- (D) Unified Market: Refers to integration of states into one market, but not directly about cascading.
Step 4: Conclusion.
The feature that removes cascading effect in GST is the provision of Input Tax Credit.
Final Answer: \[ \boxed{\text{Input Tax Credit (ITC)}} \]

Answer 3

Step 1: Recall the purpose of GST.
GST subsumed many indirect taxes at both the central and state levels into a single tax system to simplify the tax structure and establish uniformity.
Step 2: Taxes included.
At the central level: Central Excise Duty, Service Tax, Central Sales Tax, and several cesses were merged.
At the state level: VAT/Sales Tax, Octroi, Luxury Tax, Entertainment Tax, and others were subsumed.
Step 3: Evaluate the options.
- (A) All Central taxes: Incorrect. Only indirect central taxes were merged, not all.
- (B) All State taxes: Incorrect. Only certain indirect state taxes were merged.
- (C) Large number of central and state indirect taxes: Correct. This exactly describes GST.
- (D) Large number of central direct taxes: Incorrect. Direct taxes like Income Tax were not included.
Step 4: Conclusion.
GST is the amalgamation of various central and state-level indirect taxes.
Final Answer: \[ \boxed{\text{Large number of central and state indirect taxes}} \]

Answer 4

Step 1: Understanding GST coverage.
GST is designed to subsume a large number of indirect taxes on goods and services into one unified system. However, a few products are kept outside the ambit of GST for revenue and regulatory reasons.
Step 2: Products outside GST.
Alcohol for human consumption, petroleum products (like crude oil, diesel, petrol, ATF, natural gas), and tobacco are notable exclusions from GST. Tobacco, although subject to GST, still attracts additional central excise duty separately, making it effectively outside the full GST framework.
Step 3: Evaluate the options.
- (A) Gold: Covered under GST (though at a special lower rate, 3%).
- (B) Silver: Covered under GST.
- (C) Luxury Consumables: Covered under GST with higher tax rates (e.g., 28% + cess).
- (D) Tobacco: Correct, as it is kept partially outside GST, with excise duty still applicable.
Final Answer: \[ \boxed{\text{Tobacco}} \]

Answer 5

Step 1: Meaning of unified tax system.
A unified tax system is one where the same tax structure and rates are applied uniformly across all states and regions, removing disparities and complexities.
Step 2: How GST unifies taxes.
Before GST, different states levied different indirect taxes (like VAT, entry tax, octroi, etc.), creating a fragmented tax system. GST replaced these with a single national framework where tax rates and rules are uniform across the country.
Step 3: Evaluate the options.
- (A): Partially correct, as GST combines multiple taxes, but that alone doesn’t make it “unified.”
- (B): Incorrect, because some indirect taxes (like customs duty, excise on tobacco and fuel) still exist.
- (C): Correct, because GST creates uniformity in tax rates nationwide, ensuring one nation–one tax.
- (D): Incorrect, simplicity is a feature, but not the main reason it is unified.
Step 4: Conclusion.
GST is called a unified tax system mainly because it ensures tax uniformity across the country.
Final Answer: \[ \boxed{\text{Because it brought uniformity in tax rate across the country.}} \]