Chapter 30: Goods And Services Tax (JAIIB – Paper 3)

1. Which of the following is an example of a direct tax?

  • A. GST
  • B. Excise Duty on goods
  • C. Income Tax
  • D. Service Tax
Direct taxes are levied directly on the income or wealth of an individual or organization. Income Tax is a classic example.

2. GST is categorized as which type of tax?

  • A. Direct tax
  • B. Indirect tax
  • C. Capital gains tax
  • D. Wealth tax
GST is an indirect tax because it is levied on goods and services and can be passed on to the consumer.

3. Which of the following is a feature of indirect taxes?

  • A. Paid directly by taxpayers on their income
  • B. Cannot be shifted to others
  • C. Levied on income only
  • D. Can be shifted to another person or entity
Indirect taxes, like GST, can be passed on from the supplier to the consumer, making them transferable.

4. Which of the following is NOT true about GST?

  • A. GST is a direct tax levied on income
  • B. GST replaced multiple indirect taxes like VAT and service tax
  • C. GST is collected at each stage of the supply chain
  • D. GST has CGST, SGST, and IGST components
GST is an indirect tax, not a direct tax. It is levied on goods and services and replaces multiple previous indirect taxes.

5. What is the main objective of introducing GST in India?

  • A. To increase direct tax collection
  • B. To create a single, unified indirect tax system
  • C. To replace income tax
  • D. To levy tax only on imports
GST was introduced to unify various indirect taxes like VAT, service tax, and excise into a single tax to simplify the tax structure.

6. GST in India follows which tax model?

  • A. Single-level state tax
  • B. Single-level central tax
  • C. Dual VAT model
  • D. Dual GST model (CGST + SGST)
India follows a dual GST model where both the Centre (CGST) and the States (SGST) levy GST on intra-state supplies.

7. Which type of GST is levied on inter-state supply of goods and services?

  • A. SGST
  • B. CGST
  • C. IGST
  • D. UTGST
IGST (Integrated GST) is levied on inter-state supplies and imports of goods and services to avoid double taxation.

8. Which of the following is an advantage of GST?

  • A. Eliminates the cascading effect of taxes
  • B. Only benefits central government revenue
  • C. Replaces direct taxes entirely
  • D. Increases tax complexity for businesses
One of the main advantages of GST is that it eliminates the cascading effect (tax on tax) by allowing input tax credit.

9. Input Tax Credit (ITC) under GST means:

  • A. Credit given on income tax paid
  • B. Credit for tax paid on purchases that can be set off against output GST
  • C. Loan given by GST authorities
  • D. Discount on GST for small traders
ITC allows businesses to reduce the tax they have paid on inputs from the tax payable on output supplies, avoiding double taxation.

10. Who is responsible for collecting GST from customers?

  • A. RBI
  • B. Income Tax Department
  • C. State Governments only
  • D. Registered suppliers of goods or services
GST is collected by the registered supplier at each stage of supply and then deposited with the government.

11. What is the standard GST rate for most goods in India?

  • A. 5%
  • B. 12%
  • C. 18%
  • D. 28%
The standard GST rate for most goods and services in India is 18%. Certain items may attract lower or higher rates.

12. Under the Composition Scheme, small businesses can:

  • A. Charge full GST to customers
  • B. Pay GST at a fixed percentage of turnover and not claim ITC
  • C. Claim input tax credit on all purchases
  • D. Avoid GST completely
The Composition Scheme allows small taxpayers to pay GST at a fixed rate of turnover, simplifying compliance, but they cannot claim input tax credit.

13. Which of the following goods is generally exempted from GST?

  • A. Luxury cars
  • B. Branded electronics
  • C. Tobacco products
  • D. Fresh fruits and vegetables
Fresh fruits, vegetables, and some essential items are exempted from GST to reduce the tax burden on basic necessities.

14. What is the GST threshold limit for registration for most states in India?

  • A. ₹40 lakh annual turnover
  • B. ₹10 lakh annual turnover
  • C. ₹50 lakh annual turnover
  • D. ₹1 crore annual turnover
Businesses with an annual turnover exceeding ₹40 lakh (₹20 lakh for some special category states) are required to register for GST.

15. How frequently must a normal GST-registered taxpayer file GST returns?

  • A. Annually only
  • B. Once every two months
  • C. Monthly
  • D. Weekly
Normal taxpayers under GST are required to file monthly returns to report outward and inward supplies and pay the tax due.

16. CGST and SGST are levied on:

  • A. Inter-state supply of goods
  • B. Intra-state supply of goods and services
  • C. Imports only
  • D. Exported goods only
CGST (Central GST) and SGST (State GST) are levied on intra-state transactions of goods and services to share revenue between Centre and States.

17. Which of the following statements about IGST is correct?

  • A. IGST is applicable only to imports
  • B. IGST is applicable only to exports
  • C. IGST is levied only by states
  • D. IGST is levied on inter-state supply and collected by the Centre
IGST is applied on inter-state supplies and imports, collected by the Central Government, and later shared with the destination state.

18. Which return form is filed by composition scheme taxpayers?

  • A. GSTR-1
  • B. GSTR-4
  • C. GSTR-3B
  • D. GSTR-2
GSTR-4 is the quarterly return filed by composition scheme taxpayers to report their turnover and pay tax at the fixed composition rate.

19. What is the purpose of GST input tax credit mechanism?

  • A. To avoid paying GST on exports
  • B. To collect tax from customers
  • C. To reduce cascading tax effect by allowing set-off of tax paid on inputs
  • D. To increase government revenue only
Input Tax Credit allows businesses to set off the tax paid on purchases against their output tax liability, preventing tax-on-tax.

20. Which of the following statements about GST exemptions is correct?

  • A. Certain goods and services like essential food items are exempt from GST
  • B. All goods are taxed uniformly at 18%
  • C. Only imported goods are exempted
  • D. GST exemptions apply only to exporters
To reduce the burden on common people, essential goods like food items are exempt from GST, while luxury and other goods are taxed at standard rates.

21. What is the new GST slab structure introduced in September 2025?

  • A. 5%, 12%, 18%, 28%
  • B. 5%, 18%, 40%
  • C. 5%, 10%, 15%, 20%
  • D. 5%, 10%, 25%, 30%
In September 2025, the GST Council introduced a simplified two-rate structure: 5% and 18%, with a special 40% rate for luxury and sin goods. This reform aims to streamline the tax system and reduce compliance burdens.

22. Which of the following items has seen a reduction in GST from 12% to NIL as per the latest updates?

  • A. Cement
  • B. Processed foods
  • C. Life-saving drugs
  • D. Luxury cars
The GST Council has reduced the tax rate from 12% to NIL on 33 life-saving drugs and medicines, including those used for treating cancer and rare diseases, to make them more affordable.

23. What is the expected impact of the recent GST reforms on the food delivery and Q-commerce sectors?

  • A. Decline in demand
  • B. No significant change
  • C. Increased operational costs
  • D. Boost in growth and consumer demand
Analysts predict a significant growth surge for food delivery apps, quick service restaurants (QSRs), and quick commerce (QC) firms, fueled by recent GST reforms, enhanced consumer confidence, and increased discretionary spending.

24. Which sector is expected to benefit from the recent GST rate reductions on processed food items?

  • A. Processed food industry
  • B. Edible oil industry
  • C. Cement industry
  • D. Luxury goods sector
The recent GST rate reductions on processed food items are expected to significantly boost India's processed food sector, enhancing consumer demand, particularly in rural areas.

25. What is the estimated loss in IGST revenue for the government due to the latest GST rate rationalization?

  • A. ₹5,000 crore
  • B. ₹8,000 crore
  • C. ₹10,664 crore
  • D. ₹12,000 crore
The Central government may face a loss of approximately ₹10,664 crore in Integrated Goods and Services Tax (IGST) revenue due to recent GST rate rationalization measures, primarily linked to import-related tax changes.

26. What is the new GST rate applicable to cement as per the latest updates?

  • A. 5%
  • B. 18%
  • C. 28%
  • D. 40%
The GST rate on cement has been reduced from 28% to 18% to make housing and infrastructure projects more affordable and to stimulate the construction sector.

27. Which of the following items has seen a reduction in GST from 5% to NIL as per the latest updates?

  • A. Life-saving drugs
  • B. Processed foods
  • C. Cement
  • D. Luxury cars
The GST Council has reduced the tax rate from 5% to NIL on 3 life-saving drugs and medicines used for the treatment of cancer, rare diseases, and other severe chronic diseases to make them more affordable.

28. What is the primary objective of the recent GST reforms introduced in September 2025?

  • A. Increase tax rates
  • B. Simplify the tax structure
  • C. Reduce government revenue
  • D. Increase compliance burden
The primary objective of the recent GST reforms is to simplify the tax structure by consolidating multiple slabs into two primary rates (5% and 18%) and introducing a special 40% rate for luxury and sin goods, thereby reducing complexity and improving compliance.

29. Which sector is expected to benefit from the reduction in GST on cement from 28% to 18%?

  • A. Construction and infrastructure
  • B. Processed foods
  • C. Life-saving drugs
  • D. Luxury goods
The reduction in GST on cement from 28% to 18% is expected to benefit the construction and infrastructure sectors by lowering material costs and stimulating project development.

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