17.Goods and Services Tax

Question 1

What are the two types of taxes based on their application?

Answer 1

Origin-based tax and destination-based tax.

Question 2

Where is origin-based tax levied?

Answer 2

Origin-based tax is levied where goods or services are produced.

Question 3

Where is destination-based tax levied?

Answer 3

Destination-based tax is levied where goods and services are consumed.

Question 4

What concern arises with destination-based tax?

Answer 4

States that produce more but consume less are concerned about losing money because states with higher consumption receive more tax revenue.

Question 5

What was the initial reaction of some states to the implementation of Goods and Services Tax (GST)?

Answer 5

Some states were not in favor of accepting GST because they believed they would lose money due to its destination-based nature.

Question 6

How did the Government of India address the concerns of the states?

Answer 6

The government assured to compensate the states by implementing a GST Compensation Cess.

Question 7

What is the purpose of the Goods and Services Tax (Compensation to States) Act, 2017?

Answer 7

The act was enacted to levy Compensation Cess to provide compensation to the states for the loss of revenue due to the implementation of GST.

Question 8

When did the implementation of the Central Goods and Services Tax Act (CGST) come into force?

Answer 8

The CGST provisions came into force on July 1, 2017.

Question 9

How long was the Compensation Cess supposed to be applicable?

Answer 9

The Compensation Cess was to be applicable for a period of five years or as prescribed by the GST Council.

Question 10

What is the concept of Revenue Neutral Rate?

Answer 10

The concept of Revenue Neutral Rate means that the tax rate under GST should be designed in a way that tax collection remains neutral or does not decrease.

Question 11

What was the taxation scenario before the implementation of GST?

Answer 11

Both the central government and state governments had the freedom to impose taxes as per their discretion.

Question 12

What is the purpose of the National Anti-Profiteering Authority (NAPA)?

Answer 12

The purpose of NAPA is to ensure that any reduction in tax rates or benefit of input tax credit is passed on to the recipients by reducing prices accordingly.

Question 13

What has been the experience in many countries after the introduction of GST?

Answer 13

Despite the availability of input tax credit and the potential to reduce prices, there has been a noticeable increase in inflation and commodity prices.

Question 14

Why did prices not decrease as expected after the introduction of GST?

Answer 14

Suppliers were not passing on the benefits to consumers, engaging in illegal profiteering.

Question 15

Who established the National Anti-Profiteering Authority (NAPA)?

Answer 15

The Central Government constituted the National Anti-Profiteering Authority.

Question 16

What is the role of the National Anti-Profiteering Authority (NAPA)?

Answer 16

NAPA examines whether the benefits of input tax credit or reduction in tax rates have resulted in a corresponding reduction in prices for consumers.

Question 17

What is the GST Network (GSTN)?

Answer 17

The GST Network (GSTN) is a government enterprise that provides IT infrastructure and services for the implementation of GST in India.

Question 18

What is the purpose of the Goods and Services Tax Network (GSTN)?

Answer 18

The GSTN has built an Indirect Taxation platform for GST to assist taxpayers in preparing, filing returns, making payments, and complying with indirect tax requirements.

Question 19

What are the three types of taxes in GST?

Answer 19

The three types of taxes in GST are Integrated GST (IGST), State GST (SGST), and Central GST (CGST).

Question 20

What is Integrated GST (IGST)?

Answer 20

IGST is levied on the inter-state trade of goods and services. It is collected by the Central Government but shared between the Centre and states/Union Territories.

Question 21

How is the revenue distribution determined under IGST?

Answer 21

More share of revenue is given to the states that manufacture the goods compared to those consuming them.

Question 22

What is the applicability of State GST (SGST)?

Answer 22

SGST is applicable to intra-state (within the state) trade of goods and services.

Question 23

Give an example of SGST calculation.

Answer 23

For intra-state movement of goods in West Bengal attracting 12% GST, SGST and CGST will be 6% each.

Question 24

What is the scope of Central GST (CGST)?

Answer 24

CGST, similar to SGST, is applicable only on intra-state trade of goods and services.

Question 25

What is Union Territory GST (UTGST)?

Answer 25

UTGST is applicable in Union territories, but CGST will also be charged in addition to UTGST.

Question 26

Give an example of UTGST and CGST calculation.

Answer 26

For the movement of goods within any Union Territory attracting 12% GST, UTGST and CGST will be 6% each.

Question 27

What is the difference between packed items and loose products in terms of GST?

Answer 27

GST rates are higher for packed items, while there is no GST on loose products (with some exceptions) as they are mainly consumed by the poor.

Question 28

What is an Electronic Way Bill (E-Way Bill)?

Answer 28

An E-Way Bill is a receipt or document issued by a carrier containing details and instructions related to the shipment of goods, including origin, destination, consignor, consignee, and route.

Question 29

How does the Electronic Way Bill (E-Way Bill) work?

Answer 29

It is a digital compliance mechanism where the person responsible for moving goods uploads the necessary information before the goods’ transportation commences and generates an e-way bill on the GST portal.

Question 30

How is administrative control over taxpayers divided based on turnover?

Answer 30

90% of taxpayers with a turnover below Rs 1.5 crore are handled by the State Government, while the remaining 10% are handled by the Central Government. Taxpayers with a turnover above Rs 1.5 crore are divided equally between the Central and State Governments.

Question 31

What are the threshold limits for service providers to register for GST?

Answer 31

The threshold limit for service providers is Rs 20 lakh, except for states like Manipur, Mizoram, Nagaland, and Tripura, where the limit is Rs 10 lakh.

Question 32

What are the threshold limits for suppliers of goods to register for GST?

Answer 32

The threshold limit for suppliers of goods is Rs 40 lakh, except for specific states/regions such as Arunachal Pradesh, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, and Uttarakhand, where the limit is Rs 20 lakh.

Question 33

How does GST remove double taxation?

Answer 33

GST eliminates double taxation by replacing multiple taxes with a single comprehensive tax system.

Question 34

What were the taxes applicable under the old indirect tax system?

Answer 34

Under the old indirect tax system, the car manufacturing unit had to pay central excise duty, state taxes (VAT/CST), and Octroi tax on the entry of commodities.

Question 35

Can you provide an example of how taxes were calculated under the old indirect tax system?

Answer 35

Yes, for a car sale in Maharashtra, the car manufacturing unit had to pay central excise duty, VAT, and Octroi tax, all of which were added to the cost of the car.

Question 36

How did the effect of tax on tax occur in the old indirect tax system?

Answer 36

The cost of the car, along with the excise tax, was considered as the total cost for the car dealer. The dealer margin was added to this total cost, and VAT was then calculated on the new total, resulting in tax being applied on top of existing taxes.

Question 37

How does the GST system differ from the old indirect tax system in terms of taxation?

Answer 37

Under the GST system, multiple taxes are replaced by a single tax, reducing the complexity of taxation and eliminating the effect of tax on tax.

Question 38

What taxes are applicable under the GST system for the manufacturer’s sale of cars to the car dealer?

Answer 38

The applicable taxes are Central GST (CGST) and State GST (SGST), both at a rate of 11%.

Question 39

How does the GST system simplify taxation for the manufacturer?

Answer 39

Under GST, the manufacturer only needs to levy and collect GST on the sale of vehicles to the dealer, simplifying the taxation process.

Question 40

What taxes are applicable for the sale of vehicles from the dealer to the final customer?

Answer 40

The applicable taxes are CGST and SGST, both at a rate of 11%.

Question 41

How does the GST system prevent double taxation in the supply chain?

Answer 41

By replacing multiple taxes with a single GST, the system eliminates the effect of tax on tax and ensures that taxes are not duplicated at each stage of the supply chain.

Question 42

What is the benefit of GST in terms of taxation?

Answer 42

GST simplifies the tax structure, removes double taxation, and streamlines the collection and deposit of taxes with the central and state governments.

Question 43

What is input tax credit?

Answer 43

Input tax credit refers to the tax already paid by a person on inputs or services used in the production process, which can be deducted from the tax payable under GST.

Question 44

How does input tax credit help in lowering the price of final products?

Answer 44

Input tax credit eliminates the cascading effect of tax, where tax is levied on tax, by allowing businesses to offset the tax already paid on inputs. This helps in reducing the overall tax burden and can lead to lower prices of final products.

Question 45

At what stage of production is input tax credit available?

Answer 45

Input tax credit is available at every stage of production, allowing businesses to claim credit for the tax paid on inputs used in the production process.

Question 46

How does input tax credit benefit manufacturers?

Answer 46

Manufacturers can claim input tax credit on the GST paid for raw materials or services used in production. This allows them to charge GST only on the value they add to the final product, reducing the tax burden.

Question 47

What is the purpose of input tax credit under GST?

Answer 47

The purpose of input tax credit is to avoid the double taxation of goods and services by allowing businesses to claim credit for the tax paid on inputs, thus ensuring that tax is levied only on the value added at each stage of production.