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Predicted Questions with Model Answers

GST Basics: Meaning, Structure, Rates, GST Council & Key Provisions

Paper I · Unit 3 Section 12 of 13 0 PYQs 23 min
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Predicted Questions with Model Answers

Q1 (5-mark, 50 words): What is GST? Explain its dual structure with four components.

Model Answer (52 words — trim to 50):
GST (Goods and Services Tax), implemented from 1 July 2017 via the 101st Constitutional Amendment, is a comprehensive, multi-stage, destination-based indirect tax. Dual structure: (i) CGST — Centre's tax on intra-state supply; (ii) SGST — State's tax on intra-state supply; (iii) IGST — Centre collects on inter-state supply, shares with consuming state; (iv) UTGST — for Union Territories without legislature.

Trimmed (50 words):
GST, implemented 1 July 2017 (101st Constitutional Amendment), is a multi-stage, destination-based indirect tax. Four components: (i) CGST — Central tax on intra-state supply; (ii) SGST — State tax on intra-state supply; (iii) IGST — Centre collects on inter-state supply, distributes to consuming state; (iv) UTGST — for Union Territories without legislature.

Q2 (5-mark, 50 words): What are the GST rate slabs in India? Give one example for each slab.

Model Answer (50 words):
India has five GST rate slabs: (i) 0% — exempted: fresh vegetables, food grains, education, healthcare; (ii) 5% — essential goods: edible oils, sugar, coal, economy-class air travel; (iii) 12% — processed food, computers, medicines; (iv) 18% — most services, FMCG, chemicals; (v) 28% — luxury goods: cement, automobiles, tobacco, aerated drinks. Additional Cess levied on sin goods.

Q3 (5-mark, 50 words): What is Input Tax Credit (ITC) under GST? How does it eliminate the cascading effect?

Model Answer (50 words):
Input Tax Credit (ITC) allows registered businesses to deduct GST paid on inputs (purchases) from GST payable on outputs (sales). This eliminates the cascading effect (tax on tax) of the old regime. At each supply stage, only the value addition is taxed — final consumer pays exactly the applicable rate on the ultimate price, with no double taxation.

Q4 (5-mark, 50 words): Explain the composition and voting procedure of the GST Council.

Model Answer (50 words):
The GST Council (Article 279A, Constitution) comprises the Union Finance Minister as Chairperson and State Finance Ministers as members. Decisions are by three-fourths weighted majority — Centre's vote carries 1/3 weight; all States' votes combined carry 2/3 weight. It recommends GST rates, exemptions, threshold limits, and resolves Centre-State disputes on GST matters.

Q5 (5-mark, 50 words): What is the Composition Scheme under GST? Who can opt for it?

Model Answer (50 words):
The GST Composition Scheme allows small businesses with annual turnover ≤ ₹1.5 crore (₹75 lakh for special category states) to pay a flat tax rate — 1% for manufacturers/traders, 5% for restaurants, 6% for services. Benefits: simplified compliance, quarterly returns. Restrictions: cannot claim Input Tax Credit, cannot issue tax invoices, cannot supply inter-state goods.

Q6 (5-mark, 50 words): What is an E-way Bill? When is it mandatory and what is its validity?

Model Answer (50 words):
An E-way Bill is an electronic waybill generated on the GST E-way Bill portal before transporting goods valued at > ₹50,000 (intra-state or inter-state). Mandatory for registered consignors, consignees, or transporters. Validity: ≤100 km = 1 day; every additional 100 km = 1 extra day. Purpose: prevents tax evasion during transit and replaces physical gate passes at state borders.