PUBLIC FINANCE

PUBLIC FINANCE

  • The study of government’s revenue and expenditure public debt, financial administration and fiscal policy is called as Public Finance. Public finance can be divided into following sections
  • Public Revenue
  • Public Expenditure
  • Public Department
  • Fiscal Policy
  • Financial Administration

PUBLIC REVENUE

Non-Tax Revenue

  • Non-tax revenue are those receipts, which are received from sources other than taxes like fees, fines, penalties and income from public  enterprise

Tax Revenue

  • Tax is a compulsory payment by the citizens to the government to meet the public expenditure. It is legally  imposed  by the government on the  taxpayer and in no case taxpayer can deny to pay taxes to the government.

Types of Tax

  • Tax can be direct or indirect: Income tax, wealth tax, gift tax, etc are the examples of direct taxes and sales taxes, excise duty, customs duty, etc. are the example of indirect taxes

  Direct Tax

  • A direct tax is that, which is borne by the person on whom it is levied. A direct tax burden cannot be shifted to other person. Direct as well as indirect money burden of the direct tax is on the person on whom the tax is imposed. Impact of the tax as well as incidence of the tax is on the same
  • As a proportion of gross tax revenue, direct  taxes    have accounted for over a half of total tax revenue since 2007-08.

Some of the direct taxes are as follows

Personal Income Tax

  • It is the tax levied directly on the income of individuals by the Central Government. Income from all sources is added for taxation.

Corporate Tax

  • It is levied on the profit of the companies or corporations. Now, the corporate tax rate is 30%. To prevent companies from avoiding taxes a Minimum Alternate Tax (MAT) at 15% of book profit is levied. It is the largest source of revenue of the Central Government, covering about 18% of the total revenue

Estate Duty

  • It was imposed on the total property passing on the death of a person. It was a minor source of revenue and was abolished from 1st April, 1985.

Wealth Tax

  • This tax is levied on the net wealth of the individuals, Hindu undivided family and joint stock companies. To assess net wealth, net obligations are deducted from its market value. It is a minor source of revenue of the government, primarily imposed to reduce concentration of wealth in the Society

Gift Tax

  • This tax is imposed by the Central Government on all donations and gifts over and above the prescribed limits to the family members. However, donation given by the charitable institutions and companies is not covered under gift tax. This tax is basically imposed to check the evasion of estate duty and wealth tax.

Interest Tax

  • This tax is imposed on the interest income of the Commercial Banks on their gross loans and advances. Now, it is not in force in India

Indirect Tax</h3 >

  • Indirect taxes are those taxes, which have their primary burden or impact on one person, but that person succeeds in shifting his burden on to
  • Consequently, the final or the real burden of the taxes or the incidence has to be borne by a third person. In India, sales tax, excise duty, custom duty etc are the examples of indirect Taxes

Some of the indirect taxes are as follows

Central Excise Duties

  • Central excise duties are imposed by the Central Government on the goods produced within the country except certain goods on which State Governments are empowered to impose tax. These goods includes liquor, drugs

Value Added Tax (VAT)

  • VAT is a multi point sales tax with set-off for tax paid on purchases of inputs. There is no cascading (tax on tax) effect as there is credit mechanism for tax paid on The tax is levied on  the  value  of  the  product and consumption only. Total burden of the tax is borne by the consumer only.VAT is simply a new name for the sales tax of states, in which a number of other indirect taxes have been merged. Haryana was the first state to introduce VAT from 1st April, 2003. Now most states have introduced VAT
  • Value added =Total sales – Cost of intermediate

Central   Value  Added  Tax (CENVAT)

  • The basic purpose of CENVAT is to eliminate the cascading effects of the taxes by tax credit System
  • Under the CENVAT scheme, a manufacturer of final product or provider of taxable service shall be allowed to take credit of duty of excise as well as service tax paid on input received.

Custom Duties

  • These duties are imposed on commodities, which are to be imported or exported from India. In other words, when goods cross the political boundary of a country or come from other countries, custom duties are imposed. Like excise duties, customs duties also contribute largely to the government

 

Service Tax

  • Comparatively a new concept in India, service tax is a tax imposed on the person, who avails any specified service. Its importance as a source of revenue has been increasing in recent years
  • The government is receiving more and more revenue from service tax. Because of this, year after year, more and more services are being covered under the service tax ner
  • This tax was introduced in India in 1994-95. With economic growth and expansion of service sector in the economy, revenue from service tax has been increasing over the years. From Budget 2014-15, the negative list concept in service tax has been reformed and a number of service tax. However, Some of the components under the negative list have been kept intact.

Good and Services Tax (GST)

  • It is an integrated scheme of taxation that does not discriminate between goods and services and is a part of the proposed tax reforms that centre on evolving an efficient and harmonised consumption tax system in the country
  • Five key features of the GST are
    • Two components one levied by the centre (referred to as Central GST) and the other levied by the states (referred to as State GST), rates for which would be prescribed appropriately.
    • The Central GST and the State GST would be applicable to        all transactions of goods and services except the exempted goods and services.
    • The Empowered Committee has decided to adopt a two-rate structure a lower rate for necessary items and goods of basic importance and a standard rate for goods in general. There will also be a special rate for precious metals and a list of exempted items.
    • The GST will be levied on import of goods and services into the
    • The administration of the Central GST to the Centre and for State GST to the states would be given

Benefits of GST

  • To the Economy It will simplify India’s tax structure, broaden the tax  base   and create a common market across states.
  • To the Corporate It will be beneficial for India Insurance and the average tax burden on companies will fall.
  • To the       Exporters        The subsuming of major Central and State Taxes in GST, complete and comprehensive set-off input goods and services and phasing out of Central Sales Tax (CST) would reduce the cost of locally manufactured good and Services
  • To Industry manufacturing Sector in India It is one of the highly taxed  sectors                 in    the world. GST when enforced would eliminate          complexities in the present taxation structure and consequently                   prevent          the loss nearly 50% of the advantage of lower manufacturing costs that India has over the Western nations.
  • To the    Centre      and       State Increase    in  Tax  Revenues are predicted by      the government  with     the implementation of GST as it is speculated to           bring              about raise in employment promotion of exports and            consequently a            significant                boost  overall economic Growth
  • To Individuals            and Companies with the Collection of both the central and state taxes proposed to be made at the point of sale, both components will be charged on the manufacturing costs and the individuals will benefit from lowered prices in the process which will subsequently lead to increase in consumption thereby profiting Companies

Direct Tax Code (DTC)

  • The Direct Tax Code (DTC) was proposed by the UPA government to consolidate the law relating to the direct taxes. The Bill seeks to replace the Income Tax Act, 1961 and Wealth Tax Act, 1957. The Bill, in its original form, widened the tax slabs and lowers corporate tax rates

The main proposals of the Bill were

  • It widened income tax slabs for individuals with fresh slabs
  • Proposed a flat tax rate of 30% on Business income of companies.
  • It removed several tax deductions currently allowed for companies.
  • Removed the distinctions between short-term and long- term capital gains for all assets except securities listed on stock exchanges.
  • Bill introduced General Anti Avoidance Rules (GAAR) to allow the authorities to classify and arrangements to be made for curtailing the evasion of tax
  • The Direct Tax Code Bill, 2011 lapsed with the dissolution of the 15th Loksabha
  • The new Government will review the DTC in its present shape and take a view in the whole matter
  • Thus, the DTC Bill had been put on hold for reconsideration by the Goverment

Sources of Revenue

  • The following list will show the respective sources of revenue for the Union and the states

Union Sources

  • Corporation tax.
  • Currency, coinage and legal tender, foreign
  • Duties of excise on tobacco and certain goods manufactured or produced in
  • Estate duty in respect of property other than agricultural land.
  • Fees in respect of any of the matters in the Union List, but not including any fees taken in any
  • Foreign Loans
  • Lotteries organised by the Government of India or the Government of a
  • Post Office Savings bank
  • Post and             Telegraphs, Telephones, Wireless, Broad casting and other like forms of communication.
  • Property of the Union
  • Public Debt of the Union
  • Rates of stamps duty in respect of Bills of Exchanges, Cheques, promissory Notes rtc
  • Reserve Bank of India
  • Taxes on income other than agricultural
  • Taxes on the capital value of the assets, exclusive of agricultural land of individuals and companies.
  • Taxes other than stamp duties on transactions in stock exchanges and future Markets
  • Taxes on the sale or purchase of newspapers and    on advertisements                   published therein.
  • Terminal taxes on goods or passengers, carried by railways, sea or air

State Sources

  • Capitation tax.
  • Duties in respect of succession to agricultural land
  • Duties of excise on certain goods produced or manufactured in the state, such as alcoholic liquids opium etc
  • Estate duty in respect of agricultural land
  • Fees in respect of any of the matters in the State List, but not including fees taken in court
  • Land revenue
  • Rates of stamps duty in respect of documents other than those specified in the Union
  • Taxes on agricultural Income
  • Taxes on land and buildings
  • Taxes on mineral rights, subject to limitations imposed by Parliament relating to mineral development.
  • Taxes on the consumption or sale of Electricity
  • Taxes on the entry of goods into a local area for consumption, use or sale
  • Taxes on the sale and purchase of goods other than than newspapers
  • Taxes on advertisements other than those published in newspapers.
  • Taxes on goods and passengers carried by road or on inland waterways.
  • Taxes on vehicles
  • TTaxes on animals and boats
  • Taxes on professions, trades callings and employments
  • Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.

    Taxes Levied and Collected by the Union, but Assigned to the States (Article 269)

    • Duties in respect of succession to property other than agricultural land.
    • Estate duty in respect of property other than agricultural land.
    • Taxes on railway fares and freights.
    • Taxes other than stamps duties on transactions in stock exchanges and future
    • Taxes on the sale or purchase of newspapers and    on advertisements  published Markets
    • Terminal taxes on goods or passengers carried by railways, sea or air
    • Taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter- state trade or Commerce

Duties Levied by the Union, but Collected and Appropriated by the States (Article 268)

  • Stamp duties and duties of excise on medicinal and toilet preparations (those mentioned in the Union List) shall be levied by the Government of India but shall be Collected
  • In the case where such duties are leviable within any Union territory, by the Government of India
  • In other cases by the States, within which such duties are respectively leivable

Taxes Which are Levied and Collected by the Union but Which may be Distributed between the Union and the States (Articles 270 and 272)

  • Taxes on income other than agricultural income
  • Union duties of excise other than such duties of excise on medicinal and toilet preparations as are mentioned in the Union List and collected by the Government of India.
  • Taxes on income does not include corporation tax. The distribution of income-tax proceeds between the Union and the States is made on the basis of the recommendations o f the Finance Commission.

 Public Debt

  • Public Debt in the Indian context refers to the borrowings of the Central and State Governments. Public debt of Central Government consists of internal and external debt and other liabilities.

 Internal Debt

  • Includes market borrowing, money raised by issuing bonds treasury bills, special securities issued to the RBI

External Debt

  • Includes borrowings from foreign countries and international financial
  • Non-government external debt includes NRI deposits, trade credit,       external        commercial borrowings etc.

Union Sources

  • Corporation tax.
  • Currency, coinage and legal tender, foreign
  • Duties of excise on tobacco and certain goods manufactured or produced in
  • Estate duty in respect of property other than agricultural land.
  • Fees in respect of any of the matters in the Union List, but not including any fees taken in any
  • Foreign
  • Lotteries organised by the Government of India or the Government of a
  • Post Office Savings
  • Post and             Telegraphs, Telephones, Wireless, Broad casting and other like forms of communication.
  • Property of the
  • Public Debt of the
  • Rates of stamps duty in respect of Bills of Exchanges, Cheques, promissory Notes
  • Reserve Bank of
  • Taxes on income other than agricultural
  • Taxes on the capital value of the assets, exclusive of agricultural land of individuals and companies.
  • Taxes other than stamp duties on transactions in stock exchanges and future
  • Taxes on the sale or purchase of newspapers and                 on advertisements                                        published
  • Terminal taxes on goods or passengers, carried by railways, sea or

State Sources

    • Capitation tax.
    • Duties in respect of succession to agricultural
    • Duties of excise on certain goods produced or manufactured in the state, such as alcoholic liquids opium
    • Estate duty in respect of agricultural
    • Fees in respect of any of the matters in the State List, but not including fees taken in Court
    • Land Revenue
    • Rates of stamps duty in respect of documents other than those specified in the Union List
    • Taxes on agricultural Income
    • Taxes on land and buildings
    • Taxes on mineral rights, subject to limitations imposed by Parliament relating to mineral development.
    • Taxes on the consumption or sale of Electricity
    • Taxes on the entry of goods into a local area for consumption, use or sale
    • Taxes on the sale and purchase of goods other than
    • Taxes on advertisements other than those published in newspapers.
    • Taxes on goods and passengers carried by road or on inland waterways.
    • Taxes on Vehicles and Boats
    • Taxes on animals and
    • Taxes on professions, trades callings and
    • Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.
    • Tolls

Taxes Levied and Collected by the Union, but Assigned to the States (Article 269)

  • Duties in respect of succession to property other than agricultural land.
  • Estate duty in respect of property other than agricultural land.
  • Taxes on railway fares and freights.
  • Taxes other than stamps duties on transactions in stock exchanges and future
  • Taxes on the sale or purchase of newspapers and    on advertisements             published
  • Terminal taxes on goods or passengers carried by railways, sea or air
  • Taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter- state trade or far
Finance Finance 
CommissionChairmanCommissionChairman
First (1951)Mr KC Niyogi8th (1982)Mr.YB. Chavan
2nd (1956)Mr KA Santhanam9th (1987)Mr.NKP Salve
3rd (1961)Mr AK Chanda10th (1992)Shri KC Pant
4th (1966)Mr RV Rajamannar11th (1998)Prof AM Khusro
5th (1968)Mr Mahaveer Tyagi12th (2004)Dr C Rangarajan
6th (1972)Mr Brahmananda Reddy13th (2008)Dr Vijay L Kelkar
7th (1977)Mr JM Shellat14th (2012)YV Reddy

 

14th Finance Commission

  • The Government of India on 24thFebruary 2015 accepted recommendations of the 14th Finance Commission for increasing share of states in central taxes to 42%. The commission                                      recommended increase in the share of states in the centre’s tax revenue from the current 32% to 42%, the single largest      increase         ever recommended.                              The recommendation will give more power to states in determining how  they  spend  this  money  (italso correspondingly reduces the fiscal resources available to the centre). The 14th Finance Commission, headed by former RBI Governor YV Reddy, has endorsed the compensation road map for the goods and services tax finalised by the Centre, but has called for an autonomous and independent GST compensation fund.
  • In the case of value-added tax, compensation was provided to the states for three years, at 100% in the first year 75% in the second year, and 50% in the third year and the commission has suggested a similar pattern for GST compensation, but for five years.
  • The government had introduced the Constitution Amendment Bill on GST in Lok Sabha in the previous session. It is hoping to introduce the new tax from April
  • The GST aims to create seamless national market for goods and services by removing distortions caused by state fiscal policies and entry taxes that create geographical boundaries. It will replace excise duty and service tax at the central level and state taxes including value-added tax, entry tax, octroi, electricity duty, purchase
  • The commission has called for reforms in property tax regime by giving powers to panchyats and municipalities to levy the tax on plinth basis with a provision for periodic revision and minimising grant of exemptions. The per capita revenue from property tax varied from `42 to `1677 across states.
  • Members of the 14th Finance Commission YV Reddy, Abhijit Sep, M Govinda Rao, Sushama Nath and Sudipto Mundle

     FISCAL POLICY

  • Fiscal policy is that part of government policy which is concerned with raising revenue through taxation and with deciding on the amount and purpose of government spending. The idea of using fiscal policy to combat recessions     was introduced by John Maynard Keynes in the 1930s

 Objectives of Fiscal Policy

  • Fiscal policy in India has had two major objectives
  • Improving the         growth performance of the Ensuring social justice to the people.
  • Fiscal policy influences the growth performance in the following manner
    • Influencing resource mobilisation India has done well in this area as reflected in the tax GDP ratio which increased from 6.3% in 1950-51 to 16.2% in 2011-12.
    • Increasing taxes on the rich and on expenditure on luxury goods while lowering them on the poor and goods of common Spending on welfare and development

 Fiscal Responsibility and Budget Management (FRBM) Act, 2003

  • FRBM Act was passed by the Union Government to provide a legislative control over the fiscal situation of the country, which had deteriorated earlier. It was meant to bring fiscal discipline, increase plan expenditure, leave the RBI with autonomy as far as money creation was concerned, meet the consumption expenditure of the government from its own resources
  • The fiscal Responsibility and Budget Management Act, 2003 (FRBM Act), has been amended as part of the Finance Bill, 2012. It has introduced two concepts to reform the expenditure aspect of the fiscal policy.

These are

  • Effective Revenue Deficit: It excludes from the conventional revenue deficit, grants for the creation of capital assets. This is an important development for the reason that while the revenue deficit of             the                             consolidated general government fully reflects total     capital                              expenditure incurred, in the accounts of the centre, these transfers are shown as reserve expenditure. Therefore,  the                        mandate   of eliminating                 the                              conventional revenue                          deficit    of    the    centre becomes problematic. With this amendment, the endeavour of the government under the FRBM Act would be to eliminate the effective revenue defict
  • Medium-term Expenditure Framework Statement: It will set forth a three-year rolling target for expenditure indicators. It would help in undertaking a de-novo exercise for allocating resources for prioritised schemes and weeding out others that have outlived their utility.

FINANCIAL ADMINISTRATION

  • All financial activities involving issues of financial administration including public budget, its passing, auditing and similar other matters. Without a extensive study of relevant dimensions of financial administration, the subject of public finance          remains incomplete

Union Budget

  • The Budget is an extensive account of the Government’s finances, in which revenues from all sources and expenses of all activities undertaken are aggregated.
  • Union budget is an expression of the fiscal policy of the government.
  • The Finance Minister presents the Union Budget every year in the Parliament that contains the Government of India’s revenue and expenditure for one fiscalyear, which runs from 1st April  to 31st March.

Historical Preview

  • The term budget is actually derived from a French word Bougette which means a sack or pouch. It was first used in France in 1803. In the Constitution of India, the term budget is nowhere used
  • It is rather mentioned as Annual Financial Statement under Article 112 comprising the Revenue Budget, Capital Budget and also the estimates for the next fiscal year called budgeted Estimates.
  • As per the British legacy, the Union Budget of India used to be presented on the evening of last working day of the month of February to follow the British Budget.
  • During the NDA regime, then Finance Minister Yashwant Sinha was the first to present the budget on 28th February, 2001 at 11 (The budget has to be passed by the Lok Sabha before it can come into effect on 1st April.)

Preparation of Budget

  • The Budget is prepared by the budget division of Department of Economic affairs in the Ministry of Finance (MoF), after consulting with other ministries and the Planning
  • The process majorly includes following steps which may be sequential or overlapping too

Overall Budget

  • Overall budget are available for more than 1 fiscal year but are not distributed to individual fiscal year. It is a hierarchical and structure containing budget structure elements (budget hierarchy).

Passing of Finance Bill

(Under Rule 219 of the Lok Sabha)

Classification of the Budget

  • Budget of the Union Government is classified into revenue account and capital account.

Revenue Account

  • Consists of all those receipts/expenditure that do not entail sale or creation of assets or increase/decrease of liabilities.
  • Capital Account Consists of receipts/expenditure from liquidation or creation of assets or increase/decrease of liabilities.
  • Expenditure is also divided into two
    • Plan Expenditure Consists of money going to annual plans of          the union              and              State  Governments
    • Non-Plan Expenditure It is the expenditure not falling under the annual plans. It has a small capital component whose largest chunk is on defence. Bothe plan and           non-plan expenditure are divided into revenue and capital account as usual

Stages in Budget Enactment

  • The Budget goes through the following six stages in the Parliament.
  • Presentation of the Budget on the floor of the House before the Lok sabha
  • General discussion on the Budget.
  • Vote of account
  • Scrutiny by departmentally related Standing
  • Voting on demands for Grants
  • Passing of Appropriation Bill (Article 114 of the Constitution of India).

 

 TYPES OF BUDGETING

Zero-Based Budgeting

  • It is a method of budgeting, in which all budgetary allocations are set to nil at the beginning   of a financial year

Gender Budgeting

  • It came into being in 2004-05. To contribute towards the women empowerment and removal of inequality based on gender, role of budgeting has been accepted through this step

Outcome Budget

  • An Outcome Budget measures the development outcomes of all government programmes. For instance, it will tell a citizen if money has been allocated for building a primary health centre has it indeed come up. In other words, it is a means to develop a linage between the money spend by a government and the results which follow.
  • Outcome budgeting in India was introduced by the Finance Minister P Chidambaram from Budget, 2005-06. It is based on the idea that financial outlays in the budget do not necessarily lead to outcomes, while the people of the country are concerned with the outcomes
  • -The first  such  mini-budget was presented by TT Krishnamachari on 30th November, 1956, in form of fresh taxation proposals through Finance Bills, demanded by the prevailing domestic and International Economic Situation.
  • John Mathai proposed the first Budget of Republic of India in 1950 and also the creation of Planning Commission
  • Finance Minister Morarji Desai has given Budget for the maximum number of times (10), followed by P Chidambaram, who has given 9 Budgets.
  • CD Deshmukh was the first Indian Governor of RBI to have presented the Interim Budget for the year 1951-52.
  • MS Indira Gandhi is the only woman to hold the post of the Finance Minister and to have presented the Budget in her capacity as the Prime Minister of India in 1978.

TYPES OF DEFICITS

  • Revenue Deficit It is the difference between the revenue receipt on tax and non-tax side and the revenue expenditure. Revenue expenditure is synonymous with consumption and non-development.
  • Fiscal Deficit It is the difference between what the government earns and its total expenditure.
  • Fiscal Deficit = Difference between country expenditure and earnings
  • Fiscal Deficit = Revenue Receipts (Net tax revenue +Non-tax revenue) + Capital Receipts (only recoveries of loans and other receipts)- Total expenditure (Plan and non-plan)
  • Budget Deficit It considers only the difference between the total budgeted receipt and the expenditure. It was abolished in 1997.
  • Monetised Deficit It is the borrowing made from the RBI, through printing                                 fresh It is resorted to, when government cannot   borrow from market.
  • Gross Fiscal Deficit The Gross Fiscal Deficit (GFD) of government is the excess of its total expenditure, current and capital, including loans net of recovery, over revenue receipts (including external grants) and non-debt capital- Gross Fiscal Deficit = Total Expenditure – (Revenue Receipts +Non-debt Creating Capital Receipts).
  • Net Fiscal Deficit The Net Fiscal Deficit is the gross fiscal deficit reduced by net lending by government.
  • Primary Deficit The Amount by which a Government’s total expenditure exceeds its total revenue, excluding interest payments on its Primary deficit = Fiscal deficit –Interest payments.
  • Gross Primary Deficit The Gross Primary Deficit is the Gross Fiscal Deficit less interest payment while the primary revenue deficit is the revenue deficit less interest Payments
YearRevenue DeficitFiscal DeficitPrimary DeficitRevenue Deficit as per cent of Fiscal Deficit
(As per cent of GDP)
Enactment of FRBM
2003-043.54.3079.7
2004-052.43.9062.3
2005-062.540.463
2006-071.93.3-0.256.3
2007-081.12.5-0.941.4
2008-094.562.675.2
2009-105.26.53.281
2010-113.24.81.867.5
2011-12 (BE)3.44.61.674.4
2011-12 (P)4.35.72.675.5
2012-13(BE)3.55.11.968.2

UPSC Previous Year Questions:

  1. With reference to the Fourteenth Finance Commission, which of the following statements is/are correct? (CSE 2015)
    1. It has increased the share of States in the central divisible pool from  32  percent to       42
    2. It has made recommendations concerning sector-specific grants.

Select the correct answer using the code given below.

  1. a) 1 only b) 2 only
  2. c) Both 1 and 2 d) Neither 1 nor 2

 

  1. The sales tax you pay while purchasing a  toothpaste  is  a   (CSE 2014)
  2. tax imposed by the Central Government
  3. tax imposed by the Central Government but collected by the State Government
  4. tax imposed by the State Government but collected by the Central Government
  5. tax imposed and collected by the State Government
  1. In the context of Indian economy, which of the following is/are the purpose/purposes of ‘Statutory Reserve Requirements’? (CSE 2014)
  1. To enable the Central Bank to control the amount of advances the banks can create
  2. To make the people’s deposits

with banks safe and liquid

  1. To prevent the commercial banks from making excessive profits
  2. To force the banks to have sufficient vault cash to meet their day-to-day requirements

Select the correct answer using the code given below:

  1. 1 only
  2. 1 and 2 only
  3. 2 and 3 only
  4. d) 1, 2, 3 and 4
  1. In India deficit financing is used for raising resources for? (CSE 2013)
  2. Economic development
  3. Redemption of public debt
  4. Adjusting the balance payments
  5. Reducing the foreign debt
  1. Which of the following is/are among the noticeable features of the recommendations of the Thirteenth Finance Commission?
    1. A design for the Goods and Services package linked to adherence to the proposed design.
    2. A design for the creation of lakhs of jobs in the next ten years in consonance with India’s demographic dividend
  1. Devolution of a specific share of central taxes to local bodies as grants

Select the correct answer using the codes given below:

  1. 1 only
  2. 2 and 3 only
  3. 1 and 3 only
  4. 1, 2 and 3
  1. 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 increase in its

Select the correct answer using the codes given below:

  1. 1 only
  2. 2 and 3 only
  3. 2 only
  4. 1, 2 and 3
  1. Which one of the following is not a feature of ‘Value  Added  Tax’? (CSE 2011)
  2. It is a multi-point destination based system of taxation
  3. It is tax levied on value addition at each stage of transaction in the production-distribution chain
  4. It is a tax on the final consumption of goods or services

and must ultimately be borne by the consumer

  1. It is basically a subject of the Central Government and the State Governments are only a facilitator for its successful implementation.
  1. Which one of the following was not stipulated in the Fiscal Responsibility and Budget Management Act,             2003? (CSE 2010)
  2. Elimination of revenue deficit by the end of the Fiscal year 2007- 2008.
  3. Non borrowing by the central government from Reserve Bank of India except under certain Circumstance.
  4. Elimination of Primary deficit by the end of the fiscal year 2008- 2009.
  5. Fixing government Guarantees in any financial year as a percentage of
  1. Consider the following actions by the Government: (CSE 2010)
    1. Cutting the tax rates
    2. Increasing the       government spending
    3. Abolishing the subsidies

In the context of economic recession, which of the above actions can be considered a part of the “fiscal stimulus” package?

  1. a) 1 and 2 only b) 2 only
  2. c) 1 and 3 only d) 1, 2 and 3
  1. When the Reserve Bank of India announces an increase of the Cash Reserve Ratio, what does it mean? (CSE 2010)
  2. The commercial banks will have less money to
  3. The Reserve Bank of India will have less money to
  4. The Union Government will have less money to
  5. The commercial banks will have more money to
  1. 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? (CSE 2010)
  2. Service tax
  3. Personal income tax
  4. Excise duty
  5. Corporation tax
  1. Consider the following statements: (CSE 2010)
    1. The Union Government fixes the Statutory Minimum Price of sugarcane for each sugar
    2. Sugar and sugarcane are essential commodities under the Essential Commodities

Which of the statements given above is/are correct?

  1. a) 1 only b) 2 only
  2. c) Both 1 and 2 d) Neither 1 nor 2
  1. Consider the following (CSE 2009)
    1. Fringe Benefits tax
    2. Interest tax
    3. Securities transaction tax Which of the above is/are direct tax / taxes ?
    4. a) 1 only b) 1 and 2 only
    5. c) 2 and 3 only d) 1, 2 and 3
  1. A decrease in tax to GDP ratio of a country indicates which of the following?
    1. Slow in economic growth rate
    2. Less equitable    distribution    of national income

Select the correct answer using the code given below.

  1. a) 1 only b) 2 only
  2. c) Both 1 and 2 d) Neither 1 nor 2

ANSWERS:

1. (c) 2. (d) 3. (b) 4. (a) 5. (c) 6. (b) 7. (d)
8.(c) 9.(a) 10.(a) 11.(c) 12.(c) 13.(d) 14.(c)

 

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