RBSE Solutions Class 12 Business Studies Chapter 15 Goods and Service Tax (GST)

Rajasthan Board RBSE Class 12 Business Studies Chapter 15 Goods and Service Tax (GST)

RBSE Class 12 Business Studies Chapter 15 Textbook Exercise

RBSE Class 12 Business Studies Chapter 15 Short Answer Type Questions

Question 1. From when has GST been implemented in India? What is the procedure for implementing it?
Answer: Goods and Service Tax (GST) started in India on July 1, 2017. For it to become law, the President had to approve four important GST Bills. After that, both the Parliament and State legislatures needed to pass GST Bills that would clearly state the central and state GST rates, and how goods would be classified based on these rates. Once these bills became law, GST was applied across the entire country.
In simple words: GST began in India on July 1, 2017. It needed approval from the President and specific bills passed by Parliament and states to set rates and classifications before being applied nationwide.

🎯 Exam Tip: Remember the exact date of GST implementation and the two main stages of approval (Presidential assent and legislative passing) for full marks.

Question 2. Introduce GST briefly.
Answer: GST, or Goods and Services Tax, is a value-added tax applied to the manufacture, sale, and consumption of goods and services. It is a single, comprehensive tax that has replaced many indirect taxes like Excise Duty, Service Tax, and VAT. The main idea behind GST is "One Country, One Tax, One Market", simplifying the tax system across India.
In simple words: GST is one tax on making, selling, and using goods and services. It replaced many old taxes to create one simple tax system for the whole country.

🎯 Exam Tip: Define GST as a value-added tax and highlight its role in replacing multiple indirect taxes to achieve a unified market.

Question 3. Under GST, how is value addition taxed? Explain with the help of an illustration.
Answer: Under GST, tax is applied at every stage where value is added during sales. It builds on the concept of VAT (Value Added Tax). This means a person pays tax on their output (what they sell) but gets credit for the tax they paid on their inputs (what they bought). So, tax is only paid on the extra value added at each step, and the final consumer ultimately pays the entire tax.
For example: Mahesh buys goods worth Rs 8000 and sells them to Hemant for Rs 14,000. Mahesh has added Rs 6000 in value, and he must pay tax on this amount. Let's say CGST and SGST are both 6%.
(1) For the goods or services Mahesh bought, the input tax credit for CGST and SGST will be:

(2) For the goods sold by Mahesh, the calculation will be:

(3) Mahesh's total GST payable is:

In simple words: GST taxes only the extra value added at each step, not the full price. Sellers get credit for tax already paid on their raw materials, so they only pay tax on the profit margin. The person who buys the final product pays the whole tax.

🎯 Exam Tip: Clearly define 'value addition' and use a simple numerical example with input tax credit to illustrate how GST avoids cascading effects.

Question 4. List any four features of GST.
Answer: Here are four key features of GST:
1. GST is applied to the supply of both goods and services.
2. It is a destination-based tax, meaning the tax is collected where the goods or services are consumed, not where they are produced.
3. GST operates on the principle of "One Country, One Tax, One Market", aiming to unify the Indian market.
4. It allows input tax credit, which means businesses can get a credit for the GST paid on their inputs, effectively taxing only the value added at each stage.
In simple words: GST taxes goods and services, is collected where things are used, makes India one big market for tax, and lets businesses get back tax paid on their supplies.

🎯 Exam Tip: When listing features, choose distinct points such as applicability, nature (destination-based), objective (unified market), and mechanism (input tax credit).

Question 5. Which all existing taxes are merged in GST?
Answer: The following taxes have been merged into GST:
1. Central Excise Duty
2. Additional Excise Duties
3. Service Tax
4. Excise Duty Under Medicinal & Toilet Preparation Act
5. CVD & Special CVD
6. Central Sales Tax
7. Central surcharges and cesses related to the supply of goods and services
8. State surcharges and cesses related to the supply of goods and services
9. Entertainment Tax (except that levied by local bodies)
10. Tax on lottery, betting, and gambling
11. Entry Tax (All forms) and Purchase Tax
12. VAT/Sales Tax
13. Luxury Tax
14. Tax on advertisements
In simple words: Many old taxes like Excise Duty, Service Tax, Sales Tax, and VAT are now part of GST. This includes both central and state government taxes on goods and services, making one big tax instead of many small ones.

🎯 Exam Tip: Aim to list at least 5-7 distinct taxes (both central and state) that GST subsumed, focusing on the most common ones like Excise Duty, Service Tax, and VAT.

Question 6. What is GSTN? When is it used?
Answer: GSTN stands for Goods and Services Network. It is a special organization created to provide a shared IT (Information Technology) system and services. This system helps the central and state governments, taxpayers, and other groups manage and implement GST.
GSTN is used for several key functions:
1. To help businesses register for GST.
2. To send tax returns to both central and state tax departments.
3. To calculate and settle IGST (Integrated Goods and Services Tax).
It also connects with the banking network to help with tax payments and refunds.
The structure of GSTIN (GST Identification Number) which is managed by GSTN is a 15-digit number and is based on the PAN Card Number. Here's a typical structure:

In simple words: GSTN is an IT platform that helps everyone involved with GST – government, businesses, and taxpayers – to register, file returns, and manage tax payments easily. It's used for all GST-related online activities.

🎯 Exam Tip: Explain GSTN as the IT backbone for GST implementation and list its primary functions, and briefly describe the GSTIN structure if asked to draw it.

RBSE Class 12 Business Studies Chapter 15 Long Answer Type Questions

Question 1. Explain briefly the GST law along with its features.
Answer: GST (Goods and Services Tax) is a tax added to the value of goods and services when they are made, sold, and used. Before GST, India had three main types of taxes: Excise Duty, Service Tax, and VAT. GST replaced all these indirect taxes with a single tax. The core idea of GST is "One Country, One Tax, One Market."
GST is a tax based on where goods and services are finally used. It applies to all transactions where goods and services are supplied. In India, GST includes:
- **Central Goods and Services Tax (CGST):** Levied and collected by the Central Government.
- **State Goods and Service Tax (SGST):** Levied and collected by the State Government.
- **Union Territory Goods and Service Tax (UTGST):** Levied and collected by Union Territories.
- **Integrated Goods and Service Tax (IGST):** Levied by the Central Government on inter-state supplies (when goods or services move between states). IGST is roughly the total of CGST and SGST/UTGST.
Under GST, every person pays tax on what they sell and can get credit for the tax they paid on what they bought. This means only the extra value added at each step is taxed, and the final customer pays the whole tax.
**Salient Features of GST:**
1. GST applies to the supply of goods or services.
2. It is a destination-based consumption tax.
3. Taxpayers must submit regular returns to both central and state GST authorities.
4. GST replaced many existing central taxes, including Central Excise Duty, Additional Excise Duties, Service Tax, and various cesses.
5. It also replaced many state taxes, such as State VAT, Central Sales Tax, Purchase Tax, Luxury Tax, and certain Entertainment Taxes.
6. GST applies to almost all goods and services, except alcohol for human consumption.
7. For five specific petroleum products (crude oil, petrol, diesel, ATF, and natural gas), GST will be applied from a date recommended by the GST Council.
8. Tobacco and tobacco products are subject to GST, and the Central government continues to levy Central Excise Duty on them.
9. Exports and supplies to SEZs (Special Economic Zones) are zero-rated, meaning no GST is charged on them.
10. The Harmonised System of Nomenclature (HSN) Code is used for categorizing goods.
11. For businesses, a threshold exemption means GST is not applicable if their annual turnover is below Rs 20 lakh.
12. For services, the current coding system is used.
*In simple words: GST is a single tax on most goods and services, replacing many old taxes. It has different parts for central, state, and inter-state sales. Key features include taxing where products are used, allowing credit for taxes paid on inputs, and having a turnover limit for registration. This makes taxation simpler and more unified across India.

🎯 Exam Tip: Start with a clear definition of GST and its 'One Nation, One Tax' principle. Then, elaborate on CGST, SGST, UTGST, and IGST, and list at least 5-7 key features, including what taxes it replaced and its destination-based nature.

Question 3. What is meant by the concept of dual GST ? How is it incorporated in India? Explain in detail.
Answer: Many countries around the world have a single GST system, where one tax applies everywhere. However, in federal countries like Brazil and Canada, a dual GST system is used. This means both the federal and state (or provincial) governments collect GST. India has also chosen to adopt a dual GST system. In India, dual GST means that both the Central and State governments will tax goods and services at the same time. The Central government has the power to tax sales within a state, and the State governments can tax services.
GST is a tax based on the destination of goods and services, applying to all transactions where goods and services are supplied. In India, GST includes:
- **CGST (Central Goods and Services Tax):** Levied and collected by the Central Government.
- **SGST (State Goods and Service Tax):** Levied and collected by the State Government.
- **UTGST (Union Territory Goods and Service Tax):** Levied and collected by the Union Territories.
- **IGST (Integrated Goods and Service Tax):** Levied by the Central government on inter-state supplies of taxable goods and services. IGST will roughly be the sum of CGST and SGST/UTGST.
The system also includes Input Tax Credit (ITC). ITC for CGST and SGST/UTGST will be available across the supply chain. However, CGST credit cannot be used to pay SGST/UTGST, and SGST/UTGST credit cannot be used to pay CGST. But, cross-utilization is allowed between CGST / SGST/UTGST and IGST, meaning IGST credit can be used to pay CGST / SGST / UTGST and vice versa.
In simple words: Dual GST means both the Central and State governments tax goods and services at the same time, which is how India manages it. This system helps share tax revenue between the central and state authorities, ensuring tax is collected at the point of consumption across the country.

🎯 Exam Tip: Define dual GST and explain why India adopted it (federal structure). Describe how CGST, SGST, UTGST, and IGST components work together in this dual system, especially regarding inter-state transactions.

Question 4. Under GST, which all returns are to be filed by the businessmen ? What are the levies defined for default in filing the returns.
Answer: After GST was introduced, businesses need to file several returns. Before GST, small traders filed quarterly returns under VAT, and half-yearly returns under service tax. Now, under GST, every registered person must submit the following three returns:
(1) **Sales Return (Section 25) – (GST R-1):** This return contains details of all sales of goods and services made during a month. It must be filed within 10 days after the end of the month. This includes information on local sales, zero-rated sales, inter-state sales, purchase returns, exports, and debit/credit notes. This information is matched with the buyer's return (filed under Section 26). If there is any mismatch, the taxpayer gets a chance to correct it.
(2) **Purchase Return (Section 26) (GST R-2):** This return includes all details of purchases of goods and services on which the business paid GST. The due date for filing GST R-2 is the 15th of the next month. The details in this return are matched with the seller's return (filed under Section 25). Any mismatch affects the input tax credit eligibility.
(3) **Monthly Returns (Section 27) – (GST R-3):** After filing the sales and purchase returns (GST R-1 and GST R-2) on the 10th and 15th of the next month, a monthly summary of purchases, sales, and tax amounts from these returns must be filed online by the 20th of the following month. A registered taxable person who pays tax under the composite scheme must file quarterly returns.
In simple words: Businesses have to file three main returns: one for all sales (GST R-1), one for all purchases (GST R-2), and a monthly summary (GST R-3). These returns help the tax department keep track of what's bought and sold, and how much tax is due or can be claimed back.

🎯 Exam Tip: Name the three main GST returns (R-1, R-2, R-3), briefly describe what each covers, and state their respective due dates. Highlight the matching concept between R-1 and R-2.

Question 5. At what point of time, the tax will be levied?
Answer: Under GST, the tax is levied at the point of "supply of goods or services or both." The "taxable event" is the foundation of any tax system, determining when the tax applies. Historically, identifying this point has caused many legal disputes, such as whether a transaction was a sale or a service, or if a process counted as manufacturing.
The GST law aims to solve these issues by defining one clear "taxable event" as "Supply." This means that GST will apply when goods or services are supplied, unlike the old indirect taxes that were charged based on manufacturing, sales, or providing services separately.
Here’s a comparison of old tax events versus GST:

In the GST system, all supplies of goods and services are taxed in a combined way, unlike the old indirect taxes that were applied separately for manufacturing, sales, or services.
In simple words: Under GST, tax is charged at the moment goods or services are 'supplied'. This replaces older, confusing rules about when tax was due, making it simpler to know exactly when to apply tax.

🎯 Exam Tip: Emphasize that 'supply' is the sole taxable event under GST, consolidating multiple previous taxable events (manufacturing, sale, service provision). A simple table comparing old vs. new events can effectively illustrate this.

RBSE Class 12 Business Studies Chapter 15 Practical Questions

Question 1. A producer in Rajasthan buys raw material worth Rs 15,00,000 from a trader in Jaipur who sold it at the CGST rate being 12% and SGST rate 6%. The producer produces 56,000 units from this raw material by making an additionl expenditure of Rs 8,60,000. On profit, he sold all the units produced for Rs 25,00,000 to a re 2% and SGST at 6%. Calculate the tax payable.
Answer: To calculate the tax payable, we need to determine the GST on purchases (input tax) and GST on sales (output tax), then find the difference.
(1) First, let's calculate the GST paid on the raw material purchased by the manufacturer:

(2) Next, we calculate the GST on the sales made by the manufacturer:

(3) Finally, we determine the manufacturer's tax liability under GST:

In simple words: First, calculate the tax paid on buying raw materials. Then, calculate the tax collected from selling the finished products. Subtract the tax paid from the tax collected to find the final tax amount to be paid for both central (CGST) and state (SGST) taxes.

🎯 Exam Tip: Break down practical problems into clear steps: calculate input tax, calculate output tax, and then determine net tax payable by subtracting input tax credit. Ensure all rates are applied correctly.

Question 2. A trader of Rajasthan purchased good worth Rs 6 lakhs from a Jaipur based trader on which CGST rate is 12% and SGST rate is 6%. The trader sells 3/4 of the output purchased to a registered trader of Rajasthan for Rs 8 lakhs and charged CGST at the rate of 12% and SGST at the rate of 6%. Remaining goods he sells to a trader of Madhya Pradesh for 1 lakh and charged IGST of 14% on the goods sold. Calculate the tax payable.
Answer: Let's calculate the tax payable step-by-step for the trader.
(1) First, calculate the GST on the trader's purchases:

(2) Next, calculate the GST on the trader's sales. This involves two parts: intra-state sales (within Rajasthan) and inter-state sales (to Madhya Pradesh).

(3) Now, we calculate the trader's total tax liability under GST. Input tax credit on purchases was CGST Rs 72,000 and SGST Rs 36,000.

In simple words: Calculate the tax paid when buying goods. Then, calculate the tax collected from selling goods, splitting it into sales within the state (CGST/SGST) and sales to other states (IGST). Finally, subtract the tax paid from the tax collected for each type of GST to find the total tax due.

🎯 Exam Tip: For inter-state transactions, remember to apply IGST instead of CGST/SGST. Also, correctly utilize input tax credit against the corresponding output tax liabilities (CGST against CGST, SGST against SGST, IGST can be used against all three).

RBSE Class 12 Business Studies Chapter 15 Additional Questions

Question 1. What are the benefits of GST?
Answer: The Goods and Services Tax (GST) offers several benefits:
1. **Unified National Market:** It creates a single, unified tax market across India, making it easier to do business nationwide.
2. **Mitigation of Cascading Effects:** It reduces the "tax on tax" effect (cascading) by providing input tax credit throughout the supply chain.
3. **Elimination of Multiple Taxation:** It replaces many different taxes and prevents double taxation, simplifying the tax structure.
4. **Boost to 'Make in India':** It supports the 'Make in India' initiative by making domestic goods and services more competitive.
5. **Widening Tax Base and Compliance:** It helps bring more businesses into the tax net and improves how taxpayers follow tax rules.
6. **Increase in GDP:** By simplifying taxes and promoting efficiency, it contributes to the growth of the country's Gross Domestic Product.
In simple words: GST makes India a single market, removes extra taxes on taxes, gets rid of many old taxes, helps local production, brings more people into the tax system, and boosts the economy.

🎯 Exam Tip: Focus on the economic and administrative advantages of GST, such as market unification, ease of doing business, and reduced cascading effect, when listing its benefits.

Question 2. GST Registration of tax payer will be done by which government ? Draw the structure of GSTN.
Answer: GST registration for taxpayers is handled by the state governments and their respective state GST departments. They are responsible for registering all taxpayers within their jurisdiction.
The structure of GSTIN (GST Identification Number) is as follows:

In simple words: State governments and their GST departments handle taxpayer registration. The GSTIN is a 15-digit number made up of a state code, the taxpayer's PAN, an entity code, a blank digit, and a check digit.

🎯 Exam Tip: Clearly state that state governments manage GST registration. For the GSTIN structure, accurately mention the number of digits and the components like State code, PAN, and Entity code.

Question 3. Which are the taxes that GST replaces?
Answer: GST has replaced several existing indirect taxes, both at the central and state levels. The main taxes that GST replaces are:
1. Central Excise Duty
2. Service Tax
3. Countervailing Duty
4. Special Countervailing Duty
5. Value Added Tax (VAT)
6. Central Sales Tax (CST)
7. Octroi
8. Entertainment Tax
9. Entry Tax
10. Purchase Tax
11. Luxury Tax
12. Advertisement Taxes
13. Taxes applicable on lotteries
In simple words: GST took the place of many old taxes like Excise Duty, Service Tax, VAT, and Sales Tax. It merged them into one, making the tax system simpler for goods and services.

🎯 Exam Tip: When listing taxes replaced by GST, include a mix of central (e.g., Excise, Service Tax) and state-level taxes (e.g., VAT, Octroi) to demonstrate comprehensive knowledge.

Question 4. A trader of Madhya Pradesh purchases goods worth Rs 12,00,000 from a trader of Gwalior (M.P.) on which CGST rate is 12% and SGST rate is 6%. The trader sells 1/3 of the goods to a trader of Giijarat for Rs 6,00,000 and charged IGST @ 15%. Remaining goods he sells to a trader of Gwalior (M.P.) for Rs 12,00,000 on which 12% CGST and 6% SGST is payable. Calculate the tax payable.
Answer: Let's calculate the tax payable by the trader step-by-step.
(1) First, calculate the GST on the goods purchased by the trader within Madhya Pradesh:

(2) Next, calculate the GST on the sales made by the trader. This includes both intra-state sales (within MP) and inter-state sales (to Gujarat).

(3) Finally, we determine the trader's tax liability under GST. Input tax credit on purchases was CGST Rs 1,44,000 and SGST Rs 72,000.

In simple words: First, calculate the tax paid on purchases. Then, calculate the tax collected from sales, separating intra-state (CGST/SGST) and inter-state (IGST) sales. Finally, subtract the input tax credit from the collected taxes to find the total tax due for each type of GST.

🎯 Exam Tip: Pay close attention to whether the transaction is intra-state (CGST + SGST) or inter-state (IGST) when calculating tax on sales. Also, ensure that input tax credits are properly adjusted against the correct output tax types.