In which year did the Government of India introduce value-added tax (VAT) as an indirect tax in the Indian taxation system to replace the existing general sales tax?
- A.2007
- B.2005
- C.2013
- D.2011
Correct answer
Explanation
The correct answer is B, 2005. Value added tax replaced the old general sales tax from 1 April 2005, when most states adopted it on the recommendation of the empowered committee of state finance ministers. The point of VAT is that a trader pays tax only on the value added at that stage, taking credit for the tax already paid on purchases, so the cascading of tax upon tax is removed. Haryana had moved to VAT earlier, in 2003, and a few states joined later, with Uttar Pradesh the last in 2008. VAT on goods was itself absorbed into the Goods and Services Tax from 1 July 2017, though state VAT still applies to petroleum products and liquor. Option A is wrong because 2007 is when the last states were still joining. Option C is wrong because 2013 relates to the debate on the GST bill. Option D is wrong because 2011 is the year the constitutional amendment for GST was first introduced. Exam tip: link VAT 2005 with GST 2017.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
Show answer
Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about impact of tax : 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
Show answer
The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
Show answer
UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
Show answer
The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
Show answer
GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
Read the full explanation →