Samacheer Kalvi Class 11 Commerce Solutions Chapter 33 Indirect Taxation

I. Choose The Right Answer:

Question 1. Who is the chairman of the GST council?
(a) RBI Governor
(b) Finance Minister
(c) Prime Minister
(d) President of India
Answer: (b) Finance Minister
In simple words: The Finance Minister of India is the head of the GST Council, which makes important decisions about the Goods and Services Tax. This role is crucial for managing the country's indirect tax system.

🎯 Exam Tip: Remember key positions in government bodies related to finance and taxation, as these are common general knowledge questions.

Question 2. GST Stands for ........................
(a) Goods and Supply Tax
(b) Government Sales Tax
(c) Goods and Services Tax
(d) General Sales Tax
Answer: (c) Goods and Services Tax
In simple words: GST means Goods and Services Tax. It is a single tax that has replaced many older taxes on goods and services across India. This helps in making taxes simpler for everyone.

🎯 Exam Tip: Always know the full forms of important abbreviations, especially in subjects like economics and commerce.

Question 3. What kind of Tax the GST is?
(a) Direct Tax
(b) Indirect Tax
(c) Dependence on the Type of Goods and Services
(d) All Business Organisations
Answer: (b) Indirect Tax
In simple words: GST is an indirect tax. This means it is collected by the seller from the buyer at the time of sale and then paid to the government. This makes it different from direct taxes, which are paid directly by individuals to the government.

🎯 Exam Tip: Clearly understand the difference between direct and indirect taxes to correctly classify new tax systems like GST.

Question 4. What is IGST?
(a) Integrated Goods and Service Tax
(b) Indian Goods and Service Tax
(c) Initial Goods and Service Tax
(d) All of the options
Answer: (a) Integrated Goods and Service Tax
In simple words: IGST stands for Integrated Goods and Services Tax. This tax is applied when goods and services are moved from one state to another within India. It helps to keep the tax system smooth across different states.

🎯 Exam Tip: Distinguish between CGST, SGST, UGST, and IGST by remembering where and when each tax type is applied (central, state, union territory, or interstate).

Question 5. In India, GST became effective from?
(a) 1st April 2017
(b) 1st January 2017
(c) 1st July 2017
(d) 1st March 2017.
Answer: (c) 1st July 2017
In simple words: The Goods and Services Tax (GST) started in India on July 1, 2017. This date is important because it marked a big change in how taxes are collected in the country.

🎯 Exam Tip: Key dates for major economic reforms like the introduction of GST are important factual details to remember.

II. Very Short Answer Questions:

Question 1. Define Indirect tax.
Answer: An indirect tax is a tax collected by someone else from the person who actually pays it. For example, sellers collect this tax from buyers when they sell goods or services, and then the sellers pay it to the government. It is called indirect because the government does not collect it directly from the final consumer. This type of tax is often included in the price of goods and services.
In simple words: An indirect tax is paid by customers when they buy things, but the shopkeeper collects the money and gives it to the government.

🎯 Exam Tip: When defining indirect tax, highlight that the burden falls on the consumer, but the collection is done by an intermediary (like a seller).

Question 2. List out any four types of indirect taxes levied in India.
Answer: Here are four types of indirect taxes that were levied in India before GST:
1. Goods and Services Tax (GST) - This is currently the main indirect tax.
2. Excise Duty - This was a tax on goods manufactured within India.
3. Sales Tax - This was a tax on the sale of goods.
4. Value Added Tax (VAT) - This was a tax applied at each stage of production and distribution, based on the value added. The introduction of GST replaced most of these older indirect taxes.
In simple words: Some indirect taxes in India are Goods and Services Tax, Excise Duty, Sales Tax, and Value Added Tax.

🎯 Exam Tip: When listing types of taxes, make sure to specify if they are current (like GST) or historical (like excise duty, which was largely subsumed by GST).

Question 3. What do you mean by Goods and Services Taxes?
Answer: Goods and Services Tax (GST) is a tax applied to the supply or consumption of goods and services. It is a destination-based consumption tax, meaning the tax is collected at the point where the goods or services are finally consumed, not where they are produced. GST is also collected at each stage of the supply chain on the value added, helping to ensure a smooth flow of tax credit. This tax aims to simplify the previous complex indirect tax system.
In simple words: Goods and Services Tax (GST) is a tax on buying and selling goods and services. It is collected at the place where things are used and at each step where value is added.

🎯 Exam Tip: Emphasize that GST is a 'destination-based consumption tax' and that it is collected on 'value-added' at each stage for a complete definition.

Question 4. Write a note on SGST.
Answer: SGST stands for State Goods and Services Tax. This tax is imposed and collected by the State Governments for the supply of goods and services within that state (intra-state transactions). The specific rules for SGST are outlined in the respective State GST Acts, such as the Tamil Nadu GST Act 2017. SGST replaced many old state-level taxes like sales tax, luxury tax, and entry tax, simplifying the tax structure within states. It ensures that the state government gets revenue from local transactions.
In simple words: SGST is the tax collected by state governments on goods and services sold inside their own state. It replaced many old state taxes.

🎯 Exam Tip: When discussing SGST, remember to mention its collection by state governments and its application to 'intra-state' (within the state) supplies.

Question 5. What is CGST?
Answer: CGST means Central Goods and Services Tax. This tax is imposed and collected by the Central Government on the supply of goods and services within a state (intra-state transactions). The provisions for CGST are laid down in the CGST Act 2017. Together with SGST, CGST makes up the tax levied on transactions happening inside a single state. This ensures that the central government also receives revenue from these local sales.
In simple words: CGST is the tax collected by the Central Government on goods and services sold inside a state. It works with SGST for local sales.

🎯 Exam Tip: Clearly state that CGST is collected by the 'Central Government' and, like SGST, applies to 'intra-state' supplies.

III. Short Answer Questions

Question 1. Write any two differences between direct taxes and indirect taxes.
Answer:

🎯 Exam Tip: When comparing direct and indirect taxes, ensure you clearly differentiate on key aspects like who pays, who collects, shift-ability, and impact on individuals.

Question 2. What are the objectives of GST?
Answer: The Goods and Services Tax (GST) was introduced with several key objectives to improve India's tax system. Here are some of them:
1. To create a common market across India with a uniform tax rate. This helps create "One Nation, One Tax, One Market."
2. To remove the cascading effect of taxes, which means taxes on taxes. GST allows for input tax credit, where businesses can get credit for taxes paid on inputs.
3. To encourage Indian exports. GST collected on inputs for exports is refunded, making Indian products more competitive globally as exports become zero-rated.
4. To expand the tax base by bringing more taxpayers under the system, which increases government revenue.
5. To simplify tax return procedures by using common forms and reducing the need for people to visit tax departments.
6. To provide online facilities for paying taxes and submitting forms, making the process easier and more efficient. GST aims to make taxation fair and easy for everyone.
In simple words: GST aims to make one market in India, remove taxes on taxes, help exports, get more people to pay taxes, and make tax filing simple and online.

🎯 Exam Tip: When listing objectives, focus on the core benefits like simplifying the tax structure, preventing cascading effects, and promoting economic growth.

Question 3. Briefly explain the functions of GST council.
Answer: The GST Council is the main body that oversees and guides the implementation of the Goods and Services Tax in India. Its primary role is to make recommendations on various aspects of GST. The Central Board of Excise and Customs is in charge of administering the CGST and IGST Acts. Key functions of the GST Council include:
* Recommending the GST rates for different goods and services.
* Deciding on the apportionment of IGST (how the revenue from inter-state tax is shared).
* Granting exemptions from GST.
* Formulating model GST laws.
* The Union Finance Minister chairs the Council. Other members include the Minister of State in the Finance Ministry and all State Finance Ministers. The Central Government holds a one-third voting power, while State Governments collectively hold two-thirds. Decisions are made by a three-fourths majority of the total votes. Each state has one vote, regardless of its size. This cooperative structure ensures that both central and state interests are represented in tax decisions. Before 2017, twenty-four council meetings were held to establish the framework.
In simple words: The GST Council sets GST rates, decides how inter-state tax money is shared, and makes rules for GST. The Union Finance Minister leads it, and both central and state ministers are members.

🎯 Exam Tip: For the GST Council, focus on its role in making recommendations, its composition (chairperson and members), and the voting mechanism.

Question 4. Explain IGST with an example.
Answer: IGST stands for Inter-State Goods and Services Tax. It is a tax imposed and collected by the Central Government on the supply of goods and services from one state to another (inter-state transactions). The revenue collected from IGST is then shared between the Central Government and the respective States, as outlined in the IGST Act 2017. For instance, if a manufacturer in Maharashtra sells goods to a dealer in Gujarat, IGST would be applied to this transaction. This ensures that the tax is properly accounted for across state borders and avoids complications from separate state taxes. A part of this revenue goes to the consuming state and a part to the central government. IGST also applies to imports into India.
In simple words: IGST is a tax by the Central Government on goods and services moved between different states. The money from IGST is shared between the Central Government and the states involved.

🎯 Exam Tip: When explaining IGST, always mention that it is collected by the 'Central Government' and applies to 'inter-state' supplies, with revenue shared between central and state governments.

Question 5. Write any three demerits of UGST.
Answer: The question asks for demerits of "UGST". However, the common term for Union Territory GST is UTGST. Assuming UGST refers to UTGST, here are some demerits of GST in general, which might be what is intended, as UTGST specific demerits are usually linked to the overall GST system's disadvantages:
1. **Impact on Real Estate:** Many economists believed that GST would negatively affect the real estate market. It was predicted that GST might increase the cost of new homes by up to 8 percent, which could reduce demand for housing by about 12 percent. This would make homes more expensive for buyers.
2. **Lack of Real Tax Layer Reduction:** Critics also argued that CGST, SGST, and UTGST are essentially new names for older taxes like Central Excise/Service Tax, VAT, and CST. They felt that there wasn't a significant reduction in the total number of tax layers as initially promised. This made the system seem complex despite the unification attempt.
3. **Increased Prices for Some Goods:** While GST aimed to simplify, some retail products that previously had only a 4% tax became more expensive after GST. For example, garments and clothes could see higher prices due to the new tax structure. This led to increased costs for consumers on certain items. The adoption and migration to the new GST system also involved initial difficulties and learning for the entire business ecosystem.
In simple words: GST might make new homes more expensive and reduce how many people can buy them. Also, some people felt it did not really reduce the number of tax types, just gave them new names. Certain clothes and other items also became costlier after GST started.

🎯 Exam Tip: When listing demerits of a broad tax system like GST, focus on common criticisms related to price changes, complexity, and specific sector impacts.

IV. Long Answer Questions

Question 1. Distinguish between direct taxes and indirect taxes.
Answer:

🎯 Exam Tip: When distinguishing, use clear headings for comparison (e.g., Meaning, Incidence, Burden) and provide relevant examples for each type of tax.

Question 2. Discuss the different kinds of GST.
Answer: In India, the Goods and Services Tax (GST) system is divided into three main kinds to handle different types of transactions: CGST, SGST/UTGST, and IGST. This structure ensures that both central and state governments receive their due share of tax revenue.
1. **CGST (Central Goods and Services Tax):** This tax is imposed and collected by the Central Government. It applies to all supplies of goods and services made within a single state (intra-state transactions). The rules and regulations for CGST are governed by the CGST Act 2017. When you buy something locally, you pay both CGST and SGST/UTGST.
2. **SGST (State Goods and Services Tax) / UTGST (Union Territory Goods and Services Tax):** This tax is imposed and collected by the respective State Governments (for SGST) or Union Territory Administrations (for UTGST). Like CGST, it applies to supplies of goods and services made within a single state or union territory (intra-state/intra-union territory transactions). For example, the Tamil Nadu GST Act 2017 governs SGST in Tamil Nadu. UTGST applies in Union Territories without a legislature, like Chandigarh, and is collected under the UTGST Act 2017.
3. **IGST (Integrated Goods and Services Tax):** This tax is imposed and collected by the Central Government on all inter-state supplies of goods and services (transactions between different states). The revenue from IGST is then shared between the Central Government and the States as per the recommendations of the GST Council, under the IGST Act 2017. IGST also applies to goods and services imported into India. This ensures a seamless flow of tax credit for inter-state transactions.
In simple words: There are three types of GST: CGST (for central government, on sales within a state), SGST/UTGST (for state/union territory governments, on sales within their area), and IGST (for central government, on sales between states). Each type helps collect tax for different levels of government.

🎯 Exam Tip: Clearly define each type of GST (CGST, SGST/UTGST, IGST) by stating which government collects it and whether it applies to intra-state (within a state/UT) or inter-state (between states) transactions.

Question 3. Elucidate the merits of GST.
Answer: The introduction of Goods and Services Tax (GST) in India has brought several advantages, impacting society, businesses, and consumers alike. Here are some of its key merits:
**A. To the Society and country:**
1. **Unified National Market:** GST has created a single common national market in India. This encourages more foreign investment by streamlining tax processes across all States and Union Territories, integrating the entire economy.
2. **Tax Parity:** It ensures fair taxation between imported and Indian manufactured goods. All imported goods are subject to IGST, which is roughly equal to the total CGST and SGST levied on domestically manufactured goods. This helps Indian products compete better globally by removing various older taxes.
3. **Economic Growth:** GST aims to boost manufacturing, exports, and the overall Gross Domestic Product (GDP). By simplifying the tax structure and promoting ease of business, it encourages more economic activity and investment.
4. **Employment Opportunities:** The simplification and growth spurred by GST are expected to lead to the creation of more employment opportunities, helping in poverty reduction.
5. **Increased Tax Compliance & Revenue:** GST is designed to improve tax compliance by widening the tax base, meaning more taxpayers come into the system, which in turn increases revenue for the governments.
6. **Improved Ease of Doing Business:** The transparency of GST and its simplified procedures have improved India's ranking in the global Ease of Doing Business index.
7. **Reduced Tax Evasion:** Uniform tax rates across states help reduce tax evasion and prevent businesses from choosing locations based on lower tax rates.
**B. To Business Community:**
1. **Simpler Tax System:** GST replaced 17 different taxes, creating a much simpler tax system with fewer exemptions. This reduces the complexity for businesses.
2. **Reduced Cascading Effect:** The input tax credit mechanism significantly reduces the cascading effect of taxes (tax on tax), lowering the average tax burden on manufacturers. This supports initiatives like "Make in India" by making local manufacturing more competitive.
3. **Certainty in Taxation:** Common procedures, uniform classification of goods and services, and clear timelines bring greater certainty to the taxation system for businesses.
4. **Efficient Record-Keeping:** The GST Network (GSTN) facility reduces the need for multiple record-keeping, lessening investment in manpower and resources and improving efficiency.
5. **Corruption-Free Administration:** All interactions under GST are handled through a common online portal (GSTN), which helps ensure corruption-free administration.
6. **Uniform Prices:** GST leads to more uniform prices for goods and services across the country. This makes it easier for businesses to expand their operations to all states.
**C. To Consumers:**
1. **Lower Prices:** The input tax credit system helps lower the overall tax burden on businesses, which often translates to lower prices for consumers.
2. **Exemptions for Small Retailers:** Small retailers often receive exemptions, and purchases from them may cost less for consumers, supporting local businesses.
In simple words: GST makes India one big market, helps Indian goods compete better, and can create more jobs. It also makes taxes simpler for businesses by removing old taxes and reducing tax on tax. For shoppers, it can lead to lower prices and fairer costs across the country.

🎯 Exam Tip: When listing merits, categorize them (e.g., for society, business, consumers) to provide a comprehensive and structured answer. Remember key phrases like "common national market" and "cascading effect."

Question 4. Compare CGST, SGST, and IGST.
Answer:

🎯 Exam Tip: When comparing, always use a table format with clear "Basis of Difference" to organize information effectively. Focus on the collecting authority and applicability (intra-state vs. inter-state).

11th Commerce Guide Indirect Taxation Additional Important Questions and Answers

I. Choose the Correct Answer:

Question 1. GST is a ........................ based tax on consumption of goods and services.
(a) duration
(b) destination
(c) dividend
(d) development
Answer: (b) destination
In simple words: GST is a destination-based tax. This means the tax is paid in the state or place where the goods or services are finally used, not where they are produced. This ensures the tax revenue goes to the consuming state.

🎯 Exam Tip: Remember that GST is a 'destination-based' tax, which is a core concept defining its nature.

Question 2. India GST model has ........................ rate structure.
(a) 3
(b) 5
(c) 4
(d) 6
Answer: (c) 4
In simple words: India's GST system has four main tax rates. This multi-rate structure helps apply different tax percentages to different types of goods and services based on their necessity.

🎯 Exam Tip: Know the number of main GST slabs (rates) in India, as this is a common factual question.

Question 3. What is the maximum rate prescribed under GST?
(a) 12
(b) 20
(c) 28
(d) 18
Answer: (b) 20
In simple words: The highest rate for CGST or SGST/UTGST in India is 20%. This means the maximum total GST rate on any item is 40% (20% CGST + 20% SGST). This upper limit is set to prevent very high taxation on goods and services.

🎯 Exam Tip: Distinguish between the maximum rate for CGST/SGST (20%) and the highest total GST slab (28%, which is 14%+14% typically, but the Act allows up to 20% for each). The question specifically asks for the maximum rate 'prescribed under GST', which refers to the individual component rate permissible by law, not just the common slabs.

Question 4. When does liability to pay GST arise in the case of a supply of goods?
(a) on raising of invoice
(b) At the time of supply of goods
(c) On receipt of payment
(d) Earliest of any of the options
Answer: (d) Earliest of any of the options
In simple words: The time to pay GST on goods comes at the earliest of these events: when the invoice is created, when the goods are supplied, or when payment is received. This rule ensures that tax is paid promptly.

🎯 Exam Tip: For 'time of supply' questions, remember the 'earliest of the three events' rule (invoice, supply, payment) for both goods and services.

Question 5. Special provisions are there in the GST Act for the ........................ north-eastern states.
(a) 8
(b) 9
(c) 6
(d) 18
Answer: (a) 8
In simple words: The GST Act includes special rules for 8 specific North-Eastern states. These provisions often allow for different threshold limits for registration, which helps support businesses in these regions.

🎯 Exam Tip: Be aware of special provisions and exceptions within the GST Act, particularly those related to specific regions or business types.

II. Very Short Answer Questions:

Question 1. What do you mean by UGST?
Answer: UGST stands for Union Territory Goods and Services Tax (more commonly known as UTGST). This tax is established to impose and collect revenue from the five union territory administrations in India that do not have their own legislature. It operates under the UTGST Act 2017. UTGST is levied on intra-union territory supplies of goods and services, similar to how SGST is levied within a state. It ensures that these union territories also have their share of tax revenue from local transactions.
In simple words: UGST, or UTGST, is a tax collected by the central government for Union Territories that do not have their own assembly. It applies to sales within those union territories.

🎯 Exam Tip: When defining UTGST (UGST), clearly state its application to Union Territories without a legislature and its collection by the Central Government.

III. Long Answer Questions

Question 1. Write a note on GST Council:
Answer: The GST Council is the highest decision-making body for Goods and Services Tax in India. It is a joint forum of the Centre and States. Its main role is to oversee the implementation of GST and make key recommendations. While the Central Board of Excise and Customs handles the administration of the CGST and IGST Acts, the Council sets the policy direction. The GST Council performs several important functions, including:
* **Recommendations on Rates:** It recommends the various rates of GST that apply to goods and services.
* **Apportionment of IGST:** The Council decides how the revenue collected from IGST (Inter-State GST) will be divided between the Central Government and the States.
* **Exemptions:** It recommends which goods and services should be exempted from GST.
* **Model GST Laws:** The Council develops and recommends model GST laws, principles of levy, apportionment of IGST, and principles governing the place of supply.
* **Composition:** The Union Finance Minister serves as the Chairperson of the Council. Other members include the Minister of State in the Finance Ministry and the Finance Ministers of all State Governments. This inclusive membership ensures that both central and state perspectives are considered in tax decisions. The Central Government holds one-third of the voting power, and all State Governments together hold two-thirds. Decisions are made by a majority of at least three-fourths of the weighted votes of the members present and voting. Each state has one vote, regardless of its size or population. This structure ensures broad consensus on GST policies. For instance, twenty-four council meetings were held before 2017 to establish the framework.
In simple words: The GST Council is a joint group of central and state government leaders who decide all the main rules for GST, like tax rates and how money is shared. The Union Finance Minister leads it, and decisions need a big majority vote from both central and state members.

🎯 Exam Tip: When writing about the GST Council, focus on its policy-making role, its composition (Chairperson and members), its voting structure, and its key functions (rates, exemptions, IGST apportionment).

Question 3. What are all the limitations of GST?
Answer: The limitations of GST are as follows:
1. Many experts believe GST could harm the real estate market. It might make new homes up to 8 percent more expensive and lower the demand for them by about 12 percent.
2. Some critics say that CGST and SGST are just new names for older taxes like Central Excise, Service Tax, VAT, and CST. This means the number of different tax types has not truly gone down.
3. Many common retail products used to have only a 4 percent tax. After GST, items like clothes might become more costly for people.
4. The airline industry could also face problems. Service taxes on air tickets were usually 6-9 percent. With GST, this rate could go over 15 percent, making air travel much more expensive. GST aims for simplicity, but changes in tax rates can impact specific industries differently.
5. Moving to the new GST system would involve initial difficulties and learning for everyone involved in businesses.
In simple words: GST has some drawbacks. It might make houses more expensive and reduce demand. Some feel it's just old taxes with new names, and it could make clothes and flights cost more. Also, everyone needs time to get used to the new system.

🎯 Exam Tip: When discussing limitations, provide specific examples or percentages if available to strengthen your points, as this shows a deeper understanding of the economic impact.