Microtheme: GST —
14 questions asked in Prelims in the past.

1. [2025] Consider the following statements:
   Statement I:
   In India, income from allied agricultural activities like poultry farming and wool rearing in rural areas is exempted from any tax.
   Statement II:
   In India, rural agricultural land is not considered a capital asset under the provisions of the Income-tax Act, 1961.
   Which one of the following is correct in respect of the above statements?
   • (a) Both Statement I and Statement II are correct and Statement II explains Statement I
   • (b) Both Statement I and Statement II are correct but Statement II does not explain Statement I
   • (c) Statement I is correct but Statement II is not correct
   • (d) Statement I is not correct but Statement II is correct
   Correct Answer: (B) Both Statement I and Statement II are correct but Statement II does not explain Statement I
2. [2024] With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements:
   1. CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities.
   2. CSR rules do not specify minimum spending on CSR activities.
   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
   Correct Answer: (A) 1 only
3. [2018] With reference to India’s decision to levy an equalization tax of 6% on online advertisement services offered by non-resident entities, which of the following statements is/are correct?
   1. It is introduced as a part of the Income Tax Act.
   2. Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the “Double Taxation Avoidance Agreements”.
   Select the correct answer using the code given below :
   • (a) 1 only
   • (b) 2 only
   • (c) Both 1 and 2
   • (d) Neither 1 nor 2
   Correct Answer: (D) Neither 1 nor 2
4. [2018] Consider the following items:
   1. Cereal grains hulled
   2. Chicken eggs cooked
   3. Fish processed and canned
   4. Newspapers containing advertising material
   Which of the above items is/are exempted under GST (Goods and Services Tax)?
   • (a) 1 only
   • (b) 2 and 3 only
   • (c) 1, 2 and 4 only
   • (d) 1, 2, 3 and 4
   Correct Answer: (C) 1, 2 and 4 only
5. [2017] Consider the following statements :
   1. Tax revenue as a percent of GDP of India has steadily increased in the last decade.
   2. Fiscal deficit as a percent of GDP of India has steadily increased in the last decade.
   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
   Correct Answer: (D) Neither 1 nor 2
6. [2017] What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’?
   1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
   2. It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.
   3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future.
   Select the correct answer using the code given below:
   • (a) 1 only
   • (b) 2 and 3 only
   • (c) 1 and 3 only
   • (d) 1, 2 and 3
   Correct Answer: (A) 1 only
7. [2014] The sales tax you pay while purchasing a toothpaste is a
   • (a) Tax imposed by the Central Government.
   • (b) Tax imposed by the central Government but collected by the State Government.
   • (c) Tax imposed by the State Government but collected by the Central Government.
   • (d) Tax imposed and collected by the State Government.
   Correct Answer: (D) Tax imposed and collected by the State Government.
8. [2012] Under which of the following circumstances may ‘capital gains’ arise?
   1. When there is an increase in the sales of a product
   2. When there is a natural increase in the value of the property owned
   3. When you purchase a painting and there is a growth in its value due to increased demand
   • (a) 1 only
   • (b) 2 and 3 only
   • (c) 2 only
   • (d) 1, 2 and 3
   Correct Answer: (B) 2 and 3 only
9. [2011] Which one of the following is not a feature of “Value Added Tax”?
   • (a) It is a multi-point destination-based system of tax.
   • (b) It is a tax levied on value addition at each stage of transaction in the production distribution chain.
   • (c) It is a tax on the final consumption of goods or services and must ultimately be borne by the consumer.
   • (d) It is basically a subject of the Central Government, and the State Governments are only a facilitator for its successful implementation.
   Correct Answer: (D) It is basically a subject of the Central Government, and the State Governments are only a facilitator for its successful implementation.
10. [2011] In India, which of the following have the highest share in total tax revenue of the Central Government?
    • (a) Taxes on income
    • (b) Taxes on commodities and services
    • (c) Taxes on property and capital gains
    • (d) Custom duties
    Correct Answer: (B) Taxes on commodities and services
11. [2010] Consider the following statements:
    In India, taxes on transactions in Stock exchanges and futures markets are
    1. levied by the Union
    2. Collected by the States
    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
    Correct Answer: (A) 1 only
12. [2010] In India, the tax proceeds of which one of the following as a percentage of gross tax revenue has significantly declined in the last five years?
    • (a) Service Tax
    • (b) Personal Income Tax
    • (c) Excise Duty
    • (d) Corporation Tax
    Correct Answer: (C) Excise Duty
13. [2009] Consider the following:
    1. Fringe Benefit Tax
    2. Interest Tax
    3. Securities Transaction Tax
    Which of the above is/are Direct Tax/Taxes ?
    • (a) 1 only
    • (b) 1 and 3 only
    • (c) 2 and 3 only
    • (d) 1,2 and 3
    Correct Answer: (D) 1,2 and 3
14. [2004] Which of the following is not a recommendation of the task force on direct taxes under the chairmanship of Dr Vijay L. Kelkar in the year 2002?
    • (a) Abolition of Wealth Tax
    • (b) Increase in the exemption limit of personal income to Rs 1.20 lakh for widows
    • (c) Elimination of standard deduction
    • (d) Exemption from tax on dividends and capital gains from the listed equity
    Correct Answer: (B) Increase in the exemption limit of personal income to Rs 1.20 lakh for widows