The Tax System and GST — GK Questions with Answers

1. Which of these taxes are ad valorem, that is, based on value — 1. Sales tax 2. VAT 3. Property tax
   1. Only 1 and 2
   2. Only 2 and 3
   3. Only 1 and 3
   4. All three
   Show answer

   Answer: (D) All three

   None of the three cares about weight or quantity — each one is worked out from what the good or the property is worth, which makes all three ad valorem.

2. Which of these statements about gift tax are correct — 1. It was first charged in 1958 2. It was added to stop people avoiding estate duty
   1. Only 1
   2. Only 2
   3. Both are correct
   4. Neither is correct
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   Answer: (C) Both are correct

   Both are correct — gift tax was brought in so that people could not dodge estate duty simply by handing property away as a gift.

3. Which of these are indirect taxes — 1. Personal income tax 2. Import duty 3. Service tax
   1. Only 1 and 2
   2. Only 2 and 3
   3. Only 1 and 3
   4. All three
   Show answer

   Answer: (B) Only 2 and 3

   Income tax is a direct tax. Both import duty and service tax are indirect taxes, so the correct pair is 2 and 3.

4. About service tax — 1. It was introduced in 1994-95 2. In 2013-14 it covered 119 services — (UPPCS, 2009)
   1. Only 1
   2. Only 2
   3. Both are correct
   4. Neither is correct
   Show answer

   Answer: (A) Only 1

   Service tax did start in 1994-95, so that part is correct. Service tax has since been absorbed into GST, so this question is a reminder of the older system.

5. Which is the best definition of Value Added Tax (VAT) — (UPPCS, 2009)
   1. An ad valorem tax on domestic consumption, collected at every stage between production and final sale
   2. A tax on final consumption collected only at the manufacturing stage
   3. A tax collected at the rate of consumption
   4. A special tax some states charge on another state's products
   Show answer

   Answer: (A) An ad valorem tax on domestic consumption, collected at every stage between production and final sale

   VAT is charged on the value added at every single stage, from production right up to the final sale — GST itself is built on this same idea.

6. Which of these are indirect taxes — 1. Corporation tax 2. Customs duty 3. Wealth tax 4. Excise duty — (IAS, 2001)
   1. Only 1
   2. 2 and 4
   3. 1 and 3
   4. 2 and 3
   Show answer

   Answer: (B) 2 and 4

   Corporation tax and wealth tax are both direct taxes. Customs duty and excise duty are indirect taxes, so the correct pair is 2 and 4.

7. On which date did GST come into force across India
   1. 1 April 2016
   2. 1 July 2017
   3. 1 January 2017
   4. 1 April 2017
   Show answer

   Answer: (B) 1 July 2017

   GST took effect from 1 July 2017, after the 101st Constitutional Amendment of 2016.

8. Which constitutional amendment made way for GST
   1. The 99th
   2. The 100th
   3. The 101st
   4. The 102nd
   Show answer

   Answer: (C) The 101st

   The 101st Constitutional Amendment, 2016, opened the path for GST.

9. Up to what income does the Section 87A rebate make tax nil in practice, under the new regime
   1. ₹8 lakh
   2. ₹10 lakh
   3. ₹12 lakh
   4. ₹15 lakh
   Show answer

   Answer: (C) ₹12 lakh

   The slab begins at ₹4 lakh, but the Section 87A rebate brings tax down to nil in practice for taxable income up to ₹12 lakh.

10. What is the standard deduction under the new income tax regime
    1. ₹50,000
    2. ₹60,000
    3. ₹75,000
    4. ₹1,00,000
    Show answer

    Answer: (C) ₹75,000

    The new regime allows a standard deduction of ₹75,000, higher than the old regime’s ₹50,000.

11. What is the concessional corporate tax rate for a domestic company that claims no exemptions
    1. 15%
    2. 18%
    3. 22%
    4. 25%
    Show answer

    Answer: (C) 22%

    A domestic company that gives up every exemption can move to the concessional rate of 22 per cent.

12. What is the rate of Minimum Alternate Tax (MAT)
    1. 10%
    2. 12%
    3. 15%
    4. 18%
    Show answer

    Answer: (C) 15%

    MAT is charged at 15 per cent of book profit on companies that use exemptions to bring their taxable profit down to zero.

13. For shares, what is the cut-off that decides short-term against long-term capital gains
    1. 6 months
    2. 1 year
    3. 2 years
    4. 3 years
    Show answer

    Answer: (B) 1 year

    For shares this line is 1 year, against 2 years for an ordinary asset.

14. What share of votes is needed to pass a decision in the GST Council
    1. 50%
    2. 60%
    3. 67%
    4. 75%
    Show answer

    Answer: (D) 75%

    A decision in the GST Council needs three quarters, that is 75 per cent, of the total votes.

15. What is the Centre's vote weight in the GST Council
    1. 1/4
    2. 1/3
    3. 1/2
    4. 2/3
    Show answer

    Answer: (B) 1/3

    The Centre's vote weight is one third, and the states and Union Territories together hold two thirds.

16. How many digits does a GSTIN have
    1. 10
    2. 12
    3. 15
    4. 16
    Show answer

    Answer: (C) 15

    A GSTIN has 15 digits — 2 for the state code, 10 for the PAN number, and 3 for a unique code.

17. In a normal state, what is the GST registration limit for a services business
    1. ₹10 lakh
    2. ₹20 lakh
    3. ₹30 lakh
    4. ₹40 lakh
    Show answer

    Answer: (B) ₹20 lakh

    In a normal state, registration becomes compulsory once a services business crosses ₹20 lakh turnover.

18. What is the maximum turnover allowed under the GST Composition Scheme
    1. ₹50 lakh
    2. ₹1 crore
    3. ₹1.5 crore
    4. ₹2 crore
    Show answer

    Answer: (C) ₹1.5 crore

    Traders with turnover under ₹1.5 crore may opt for the Composition Scheme.

19. Above what value of goods being moved is an E-way Bill compulsory
    1. ₹25,000
    2. ₹50,000
    3. ₹1 lakh
    4. ₹2 lakh
    Show answer

    Answer: (B) ₹50,000

    An E-way Bill is compulsory for moving goods worth more than ₹50,000.

20. On what date did the new GST 2.0 rates take effect
    1. 15 August 2025
    2. 3 September 2025
    3. 22 September 2025
    4. 1 October 2025
    Show answer

    Answer: (C) 22 September 2025

    The announcement came on 15 August, the decision at the 56th Council meeting on 3 September, and the rates themselves took effect from 22 September 2025.

21. What is the demerit rate under GST 2.0
    1. 18%
    2. 28%
    3. 35%
    4. 40%
    Show answer

    Answer: (D) 40%

    Luxury and sin goods are charged a demerit rate of 40 per cent under GST 2.0.

22. On what date did GAAR become effective
    1. 1 April 2013
    2. 1 April 2014
    3. 1 April 2016
    4. 1 April 2017
    Show answer

    Answer: (D) 1 April 2017

    After being postponed several times, GAAR finally became effective on 1 April 2017.

23. Which of these is an example of a tax haven
    1. Cayman Islands
    2. Mauritius
    3. Both of these
    4. Neither of these
    Show answer

    Answer: (C) Both of these

    Both the Cayman Islands and Mauritius are low or zero-tax territories, and both are examples of a tax haven.

24. What is the main purpose of the Tobin tax
    1. Protecting the environment
    2. Curbing speculation in foreign exchange
    3. Raising corporate tax
    4. Cutting imports
    Show answer

    Answer: (B) Curbing speculation in foreign exchange

    The Tobin tax is charged on money entering and leaving a country, to curb volatile, speculative capital flows.

25. What is the correct difference between tax avoidance and tax evasion
    1. Both are illegal
    2. Both are legal
    3. Evasion is illegal, avoidance is legal but exploits a gap
    4. Avoidance is illegal, evasion is legal
    Show answer

    Answer: (C) Evasion is illegal, avoidance is legal but exploits a gap

    Tax evasion breaks the law, so it is illegal. Tax avoidance exploits a gap in the law, so it is legal, though it stays disputed.

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