Q. Consider the following statements about GST:
1. The Goods and Services Tax (GST) is a direct tax on the manufacture, sale, and consumption of goods and services throughout India except Jammu and Kashmir.
2. GST is applied to all goods other than crude petroleum, motor spirit, diesel, aviation turbine fuel, natural gas and alcohol for human consumption.
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

Answer: B
Notes:

What is the GST and its key provisions?

  • The Goods and Services Tax (GST) is an indirect tax on the manufacture, sale, and consumption of goods and services throughout India;
  • It was launched and 2017. It replaced the existing indirect taxes with varying rates levied by the Union and State Governments. It is a single uniform tax applicable in the whole nation;
  • It is a destination-based tax applied on goods and services at the place where final/actual consumption happens;
  • GST is applied to all goods other than crude petroleum, motor spirit, diesel, aviation turbine fuel, natural gas and alcohol for human consumption;
  • There are four slabs for taxes for both goods and services: 5%, 12%, 18%, and 28%. Different tax slabs were introduced because goods of daily necessities could not be subjected to the same rate as luxury items;
  • A cess is levied on the highest tax slab of 28% on luxury, sin and demerit goods. The collection from the cess goes to a separate corpus called Compensation fund. It is used to make up for revenue loss suffered by the States due to roll out of the GST. States were promised a compensation for 5 years if their GST collection falls short of the 14 percent compounded revenue growth.

Source: EPIC July 2022