Reading Comprehension Online Practice Test 5 – Free RC Quiz for SSC, Banking, Railway & UPSC

Direction: Read the following passage carefully and answer the questions that follow.

Finance Minister Arun Jaitley once rightly said that a delayed goods and services tax (GST) is better than a flawed one. Unfortunately, this reality was ignored on 1 July 2017 when GST was rolled out in India. Conceptually, GST aims to create a uniform market by removing existing distortions, barriers, and complicated multi-tiered tax structures. The Indian version of GST that has three layers—state GST, central GST, and integrated GST—with multiple rates, however, does not look simple.

The chaos witnessed since the day of the GST roll-out exposes the unpreparedness of the implementation machinery. While we have had the benefit of learning from the experiences of other GST jurisdictions, the current fiasco was forthcoming in a heterogeneous nation such as India with glaring disparities and a legacy of disconnect between policymaking and implementation. The formal sector, equipped with resources and access to information, is somehow coping with this disruption, but the first shock wave of GST has swept small businesses off their feet.

Determination of an optimum exemption threshold is a challenging task. Striking a delicate balance between maximisation of revenue collection and minimising the administrative cost is not easy. Besides, differential treatment of taxpayers can have competition implications (Keen and Mintz 2004). Under GST, a person with an annual turnover of less than Rs20 lakh is exempted from registration. This directly impacts lakhs of manufacturers who enjoyed a small scale industry (SSI) exemption (up to a turnover of Rs1.5 crore) from payment of excise duty. The rationale behind the present threshold is questionable. While it is apparent that the central government was under huge pressure to compensate states for revenue losses, the report on revenue neutral rate (RNR) (Ministry of Finance 2015) does not corroborate the rationale for a low threshold. The report analyses sales turnover data of taxpayers available for 2012–13 (Ministry of Finance 2015). The data shows that asseesses with sales turnover between Rs 40 lakh and Rs 1 crore contributes approximately 2% of the total sales turnover. Taxpayers with turnover between the report on revenue neutral rate (RNR) (Ministry of Finance 2015) Rs 25 lakh and Rs 40 lakh contribute only 0.5% of the total turnover, while businesses with a turnover of between Rs 10 crore and Rs 100 crore, and above Rs 100 crore, account for more than 80% of the total turnover. The report suggested Rs 40 lakh as the exemption threshold. This was not considered.

One of the cardinal principles of revenue collection is that the cost involved in collecting tax from small taxpayers is too high and disproportionate to the revenue generated. Besides, the huge compliance cost to be incurred by small enterprises under GST can be disproportionate and cumbersome. This can create a situation of double loss to the economy. It may be noted that around 90% of indirect tax revenue is estimated to come from taxpayers with an annual turnover of more than Rs 1.5 crore. Another possible goal for fixing a low threshold is to track/capture maximum low-value transactions across the economy so that the informal sector can be plugged into the formal set-up. While this goal is appreciable, compliance cost and cost of doing business should be commensurate to the profits earned.

Q.  How is the formal sector successful to some extent in dealing with the turmoil created by the GST?

Direction: Read the following passage carefully and answer the questions that follow.

Finance Minister Arun Jaitley once rightly said that a delayed goods and services tax (GST) is better than a flawed one. Unfortunately, this reality was ignored on 1 July 2017 when GST was rolled out in India. Conceptually, GST aims to create a uniform market by removing existing distortions, barriers, and complicated multi-tiered tax structures. The Indian version of GST that has three layers—state GST, central GST, and integrated GST—with multiple rates, however, does not look simple.

The chaos witnessed since the day of the GST roll-out exposes the unpreparedness of the implementation machinery. While we have had the benefit of learning from the experiences of other GST jurisdictions, the current fiasco was forthcoming in a heterogeneous nation such as India with glaring disparities and a legacy of disconnect between policymaking and implementation. The formal sector, equipped with resources and access to information, is somehow coping with this disruption, but the first shock wave of GST has swept small businesses off their feet.

Determination of an optimum exemption threshold is a challenging task. Striking a delicate balance between maximisation of revenue collection and minimising the administrative cost is not easy. Besides, differential treatment of taxpayers can have competition implications (Keen and Mintz 2004). Under GST, a person with an annual turnover of less than Rs20 lakh is exempted from registration. This directly impacts lakhs of manufacturers who enjoyed a small scale industry (SSI) exemption (up to a turnover of Rs1.5 crore) from payment of excise duty. The rationale behind the present threshold is questionable. While it is apparent that the central government was under huge pressure to compensate states for revenue losses, the report on revenue neutral rate (RNR) (Ministry of Finance 2015) does not corroborate the rationale for a low threshold. The report analyses sales turnover data of taxpayers available for 2012–13 (Ministry of Finance 2015). The data shows that asseesses with sales turnover between Rs 40 lakh and Rs 1 crore contributes approximately 2% of the total sales turnover. Taxpayers with turnover between the report on revenue neutral rate (RNR) (Ministry of Finance 2015) Rs 25 lakh and Rs 40 lakh contribute only 0.5% of the total turnover, while businesses with a turnover of between Rs 10 crore and Rs 100 crore, and above Rs 100 crore, account for more than 80% of the total turnover. The report suggested Rs 40 lakh as the exemption threshold. This was not considered.

One of the cardinal principles of revenue collection is that the cost involved in collecting tax from small taxpayers is too high and disproportionate to the revenue generated. Besides, the huge compliance cost to be incurred by small enterprises under GST can be disproportionate and cumbersome. This can create a situation of double loss to the economy. It may be noted that around 90% of indirect tax revenue is estimated to come from taxpayers with an annual turnover of more than Rs 1.5 crore. Another possible goal for fixing a low threshold is to track/capture maximum low-value transactions across the economy so that the informal sector can be plugged into the formal set-up. While this goal is appreciable, compliance cost and cost of doing business should be commensurate to the profits earned.

Q.  Why does the author see the turmoil created by the GST as inevitable in India?

(i) Because the implementation of novel concepts in India has a poor track record

(ii) Because of the huge disparities and lag between policy making and its execution

(iii) Because the GST has been successful only in advanced economies

Direction: Read the following passage carefully and answer the questions that follow.

Finance Minister Arun Jaitley once rightly said that a delayed goods and services tax (GST) is better than a flawed one. Unfortunately, this reality was ignored on 1 July 2017 when GST was rolled out in India. Conceptually, GST aims to create a uniform market by removing existing distortions, barriers, and complicated multi-tiered tax structures. The Indian version of GST that has three layers—state GST, central GST, and integrated GST—with multiple rates, however, does not look simple.

The chaos witnessed since the day of the GST roll-out exposes the unpreparedness of the implementation machinery. While we have had the benefit of learning from the experiences of other GST jurisdictions, the current fiasco was forthcoming in a heterogeneous nation such as India with glaring disparities and a legacy of disconnect between policymaking and implementation. The formal sector, equipped with resources and access to information, is somehow coping with this disruption, but the first shock wave of GST has swept small businesses off their feet.

Determination of an optimum exemption threshold is a challenging task. Striking a delicate balance between maximisation of revenue collection and minimising the administrative cost is not easy. Besides, differential treatment of taxpayers can have competition implications (Keen and Mintz 2004). Under GST, a person with an annual turnover of less than Rs20 lakh is exempted from registration. This directly impacts lakhs of manufacturers who enjoyed a small scale industry (SSI) exemption (up to a turnover of Rs1.5 crore) from payment of excise duty. The rationale behind the present threshold is questionable. While it is apparent that the central government was under huge pressure to compensate states for revenue losses, the report on revenue neutral rate (RNR) (Ministry of Finance 2015) does not corroborate the rationale for a low threshold. The report analyses sales turnover data of taxpayers available for 2012–13 (Ministry of Finance 2015). The data shows that asseesses with sales turnover between Rs 40 lakh and Rs 1 crore contributes approximately 2% of the total sales turnover. Taxpayers with turnover between the report on revenue neutral rate (RNR) (Ministry of Finance 2015) Rs 25 lakh and Rs 40 lakh contribute only 0.5% of the total turnover, while businesses with a turnover of between Rs 10 crore and Rs 100 crore, and above Rs 100 crore, account for more than 80% of the total turnover. The report suggested Rs 40 lakh as the exemption threshold. This was not considered.

One of the cardinal principles of revenue collection is that the cost involved in collecting tax from small taxpayers is too high and disproportionate to the revenue generated. Besides, the huge compliance cost to be incurred by small enterprises under GST can be disproportionate and cumbersome. This can create a situation of double loss to the economy. It may be noted that around 90% of indirect tax revenue is estimated to come from taxpayers with an annual turnover of more than Rs 1.5 crore. Another possible goal for fixing a low threshold is to track/capture maximum low-value transactions across the economy so that the informal sector can be plugged into the formal set-up. While this goal is appreciable, compliance cost and cost of doing business should be commensurate to the profits earned.

Q.  Which of the following statements can be inferred from the report on revenue neutral rate (RNR)?

(i) A low threshold on SMEs will not result in greater revenue for the government

(ii) The report agrees with the threshold levied under the GST on small businesses

(iii) Higher taxes on businesses with a turnover between 40 lakhs to 1 crore can compensate states for their revenue losses

Direction: Read the following passage carefully and answer the questions that follow.

Finance Minister Arun Jaitley once rightly said that a delayed goods and services tax (GST) is better than a flawed one. Unfortunately, this reality was ignored on 1 July 2017 when GST was rolled out in India. Conceptually, GST aims to create a uniform market by removing existing distortions, barriers, and complicated multi-tiered tax structures. The Indian version of GST that has three layers—state GST, central GST, and integrated GST—with multiple rates, however, does not look simple.

The chaos witnessed since the day of the GST roll-out exposes the unpreparedness of the implementation machinery. While we have had the benefit of learning from the experiences of other GST jurisdictions, the current fiasco was forthcoming in a heterogeneous nation such as India with glaring disparities and a legacy of disconnect between policymaking and implementation. The formal sector, equipped with resources and access to information, is somehow coping with this disruption, but the first shock wave of GST has swept small businesses off their feet.

Determination of an optimum exemption threshold is a challenging task. Striking a delicate balance between maximisation of revenue collection and minimising the administrative cost is not easy. Besides, differential treatment of taxpayers can have competition implications (Keen and Mintz 2004). Under GST, a person with an annual turnover of less than Rs20 lakh is exempted from registration. This directly impacts lakhs of manufacturers who enjoyed a small scale industry (SSI) exemption (up to a turnover of Rs1.5 crore) from payment of excise duty. The rationale behind the present threshold is questionable. While it is apparent that the central government was under huge pressure to compensate states for revenue losses, the report on revenue neutral rate (RNR) (Ministry of Finance 2015) does not corroborate the rationale for a low threshold. The report analyses sales turnover data of taxpayers available for 2012–13 (Ministry of Finance 2015). The data shows that asseesses with sales turnover between Rs 40 lakh and Rs 1 crore contributes approximately 2% of the total sales turnover. Taxpayers with turnover between the report on revenue neutral rate (RNR) (Ministry of Finance 2015) Rs 25 lakh and Rs 40 lakh contribute only 0.5% of the total turnover, while businesses with a turnover of between Rs 10 crore and Rs 100 crore, and above Rs 100 crore, account for more than 80% of the total turnover. The report suggested Rs 40 lakh as the exemption threshold. This was not considered.

One of the cardinal principles of revenue collection is that the cost involved in collecting tax from small taxpayers is too high and disproportionate to the revenue generated. Besides, the huge compliance cost to be incurred by small enterprises under GST can be disproportionate and cumbersome. This can create a situation of double loss to the economy. It may be noted that around 90% of indirect tax revenue is estimated to come from taxpayers with an annual turnover of more than Rs 1.5 crore. Another possible goal for fixing a low threshold is to track/capture maximum low-value transactions across the economy so that the informal sector can be plugged into the formal set-up. While this goal is appreciable, compliance cost and cost of doing business should be commensurate to the profits earned.

Q. Which of the following could be a reason for low threshold by the central government on small scale industry under the GST?

Direction: Read the following passage carefully and answer the questions that follow.

Finance Minister Arun Jaitley once rightly said that a delayed goods and services tax (GST) is better than a flawed one. Unfortunately, this reality was ignored on 1 July 2017 when GST was rolled out in India. Conceptually, GST aims to create a uniform market by removing existing distortions, barriers, and complicated multi-tiered tax structures. The Indian version of GST that has three layers—state GST, central GST, and integrated GST—with multiple rates, however, does not look simple.

The chaos witnessed since the day of the GST roll-out exposes the unpreparedness of the implementation machinery. While we have had the benefit of learning from the experiences of other GST jurisdictions, the current fiasco was forthcoming in a heterogeneous nation such as India with glaring disparities and a legacy of disconnect between policymaking and implementation. The formal sector, equipped with resources and access to information, is somehow coping with this disruption, but the first shock wave of GST has swept small businesses off their feet.

Determination of an optimum exemption threshold is a challenging task. Striking a delicate balance between maximisation of revenue collection and minimising the administrative cost is not easy. Besides, differential treatment of taxpayers can have competition implications (Keen and Mintz 2004). Under GST, a person with an annual turnover of less than Rs20 lakh is exempted from registration. This directly impacts lakhs of manufacturers who enjoyed a small scale industry (SSI) exemption (up to a turnover of Rs1.5 crore) from payment of excise duty. The rationale behind the present threshold is questionable. While it is apparent that the central government was under huge pressure to compensate states for revenue losses, the report on revenue neutral rate (RNR) (Ministry of Finance 2015) does not corroborate the rationale for a low threshold. The report analyses sales turnover data of taxpayers available for 2012–13 (Ministry of Finance 2015). The data shows that asseesses with sales turnover between Rs 40 lakh and Rs 1 crore contributes approximately 2% of the total sales turnover. Taxpayers with turnover between the report on revenue neutral rate (RNR) (Ministry of Finance 2015) Rs 25 lakh and Rs 40 lakh contribute only 0.5% of the total turnover, while businesses with a turnover of between Rs 10 crore and Rs 100 crore, and above Rs 100 crore, account for more than 80% of the total turnover. The report suggested Rs 40 lakh as the exemption threshold. This was not considered.

One of the cardinal principles of revenue collection is that the cost involved in collecting tax from small taxpayers is too high and disproportionate to the revenue generated. Besides, the huge compliance cost to be incurred by small enterprises under GST can be disproportionate and cumbersome. This can create a situation of double loss to the economy. It may be noted that around 90% of indirect tax revenue is estimated to come from taxpayers with an annual turnover of more than Rs 1.5 crore. Another possible goal for fixing a low threshold is to track/capture maximum low-value transactions across the economy so that the informal sector can be plugged into the formal set-up. While this goal is appreciable, compliance cost and cost of doing business should be commensurate to the profits earned.

Q. Which of the following statements is definitely FALSE in the context of the given passage?

Direction: Read the following passage carefully and answer the questions that follow.

Finance Minister Arun Jaitley once rightly said that a delayed goods and services tax (GST) is better than a flawed one. Unfortunately, this reality was ignored on 1 July 2017 when GST was rolled out in India. Conceptually, GST aims to create a uniform market by removing existing distortions, barriers, and complicated multi-tiered tax structures. The Indian version of GST that has three layers—state GST, central GST, and integrated GST—with multiple rates, however, does not look simple.

The chaos witnessed since the day of the GST roll-out exposes the unpreparedness of the implementation machinery. While we have had the benefit of learning from the experiences of other GST jurisdictions, the current fiasco was forthcoming in a heterogeneous nation such as India with glaring disparities and a legacy of disconnect between policymaking and implementation. The formal sector, equipped with resources and access to information, is somehow coping with this disruption, but the first shock wave of GST has swept small businesses off their feet.

Determination of an optimum exemption threshold is a challenging task. Striking a delicate balance between maximisation of revenue collection and minimising the administrative cost is not easy. Besides, differential treatment of taxpayers can have competition implications (Keen and Mintz 2004). Under GST, a person with an annual turnover of less than Rs20 lakh is exempted from registration. This directly impacts lakhs of manufacturers who enjoyed a small scale industry (SSI) exemption (up to a turnover of Rs1.5 crore) from payment of excise duty. The rationale behind the present threshold is questionable. While it is apparent that the central government was under huge pressure to compensate states for revenue losses, the report on revenue neutral rate (RNR) (Ministry of Finance 2015) does not corroborate the rationale for a low threshold. The report analyses sales turnover data of taxpayers available for 2012–13 (Ministry of Finance 2015). The data shows that asseesses with sales turnover between Rs 40 lakh and Rs 1 crore contributes approximately 2% of the total sales turnover. Taxpayers with turnover between the report on revenue neutral rate (RNR) (Ministry of Finance 2015) Rs 25 lakh and Rs 40 lakh contribute only 0.5% of the total turnover, while businesses with a turnover of between Rs 10 crore and Rs 100 crore, and above Rs 100 crore, account for more than 80% of the total turnover. The report suggested Rs 40 lakh as the exemption threshold. This was not considered.

One of the cardinal principles of revenue collection is that the cost involved in collecting tax from small taxpayers is too high and disproportionate to the revenue generated. Besides, the huge compliance cost to be incurred by small enterprises under GST can be disproportionate and cumbersome. This can create a situation of double loss to the economy. It may be noted that around 90% of indirect tax revenue is estimated to come from taxpayers with an annual turnover of more than Rs 1.5 crore. Another possible goal for fixing a low threshold is to track/capture maximum low-value transactions across the economy so that the informal sector can be plugged into the formal set-up. While this goal is appreciable, compliance cost and cost of doing business should be commensurate to the profits earned.

Q.  Taxing the small taxpayers can be a reason for double loss to the economy because of

(i) the high cost associated with the collection of small taxes

(ii) the loss of business to small taxpayers as they are mostly in informal sector

(iii) the high cost incurred in complying with the new GST norms

Direction: Read the following passage carefully and answer the questions that follow.

Finance Minister Arun Jaitley once rightly said that a delayed goods and services tax (GST) is better than a flawed one. Unfortunately, this reality was ignored on 1 July 2017 when GST was rolled out in India. Conceptually, GST aims to create a uniform market by removing existing distortions, barriers, and complicated multi-tiered tax structures. The Indian version of GST that has three layers—state GST, central GST, and integrated GST—with multiple rates, however, does not look simple.

The chaos witnessed since the day of the GST roll-out exposes the unpreparedness of the implementation machinery. While we have had the benefit of learning from the experiences of other GST jurisdictions, the current fiasco was forthcoming in a heterogeneous nation such as India with glaring disparities and a legacy of disconnect between policymaking and implementation. The formal sector, equipped with resources and access to information, is somehow coping with this disruption, but the first shock wave of GST has swept small businesses off their feet.

Determination of an optimum exemption threshold is a challenging task. Striking a delicate balance between maximisation of revenue collection and minimising the administrative cost is not easy. Besides, differential treatment of taxpayers can have competition implications (Keen and Mintz 2004). Under GST, a person with an annual turnover of less than Rs20 lakh is exempted from registration. This directly impacts lakhs of manufacturers who enjoyed a small scale industry (SSI) exemption (up to a turnover of Rs1.5 crore) from payment of excise duty. The rationale behind the present threshold is questionable. While it is apparent that the central government was under huge pressure to compensate states for revenue losses, the report on revenue neutral rate (RNR) (Ministry of Finance 2015) does not corroborate the rationale for a low threshold. The report analyses sales turnover data of taxpayers available for 2012–13 (Ministry of Finance 2015). The data shows that asseesses with sales turnover between Rs 40 lakh and Rs 1 crore contributes approximately 2% of the total sales turnover. Taxpayers with turnover between the report on revenue neutral rate (RNR) (Ministry of Finance 2015) Rs 25 lakh and Rs 40 lakh contribute only 0.5% of the total turnover, while businesses with a turnover of between Rs 10 crore and Rs 100 crore, and above Rs 100 crore, account for more than 80% of the total turnover. The report suggested Rs 40 lakh as the exemption threshold. This was not considered.

One of the cardinal principles of revenue collection is that the cost involved in collecting tax from small taxpayers is too high and disproportionate to the revenue generated. Besides, the huge compliance cost to be incurred by small enterprises under GST can be disproportionate and cumbersome. This can create a situation of double loss to the economy. It may be noted that around 90% of indirect tax revenue is estimated to come from taxpayers with an annual turnover of more than Rs 1.5 crore. Another possible goal for fixing a low threshold is to track/capture maximum low-value transactions across the economy so that the informal sector can be plugged into the formal set-up. While this goal is appreciable, compliance cost and cost of doing business should be commensurate to the profits earned.

Q.  Which of the following statements can be concluded in the context of the Indian version of GST?

(i) It is flawed due to its complex structure

(ii) The slabs introduced under the GST has hurt SMEs

(iii) The Indian version aims to create a uniform market by eliminating a multi-tire tax structure.

Direction: Read the following passage carefully and answer the questions that follow.

Finance Minister Arun Jaitley once rightly said that a delayed goods and services tax (GST) is better than a flawed one. Unfortunately, this reality was ignored on 1 July 2017 when GST was rolled out in India. Conceptually, GST aims to create a uniform market by removing existing distortions, barriers, and complicated multi-tiered tax structures. The Indian version of GST that has three layers—state GST, central GST, and integrated GST—with multiple rates, however, does not look simple.

The chaos witnessed since the day of the GST roll-out exposes the unpreparedness of the implementation machinery. While we have had the benefit of learning from the experiences of other GST jurisdictions, the current fiasco was forthcoming in a heterogeneous nation such as India with glaring disparities and a legacy of disconnect between policymaking and implementation. The formal sector, equipped with resources and access to information, is somehow coping with this disruption, but the first shock wave of GST has swept small businesses off their feet.

Determination of an optimum exemption threshold is a challenging task. Striking a delicate balance between maximisation of revenue collection and minimising the administrative cost is not easy. Besides, differential treatment of taxpayers can have competition implications (Keen and Mintz 2004). Under GST, a person with an annual turnover of less than Rs20 lakh is exempted from registration. This directly impacts lakhs of manufacturers who enjoyed a small scale industry (SSI) exemption (up to a turnover of Rs1.5 crore) from payment of excise duty. The rationale behind the present threshold is questionable. While it is apparent that the central government was under huge pressure to compensate states for revenue losses, the report on revenue neutral rate (RNR) (Ministry of Finance 2015) does not corroborate the rationale for a low threshold. The report analyses sales turnover data of taxpayers available for 2012–13 (Ministry of Finance 2015). The data shows that asseesses with sales turnover between Rs 40 lakh and Rs 1 crore contributes approximately 2% of the total sales turnover. Taxpayers with turnover between the report on revenue neutral rate (RNR) (Ministry of Finance 2015) Rs 25 lakh and Rs 40 lakh contribute only 0.5% of the total turnover, while businesses with a turnover of between Rs 10 crore and Rs 100 crore, and above Rs 100 crore, account for more than 80% of the total turnover. The report suggested Rs 40 lakh as the exemption threshold. This was not considered.

One of the cardinal principles of revenue collection is that the cost involved in collecting tax from small taxpayers is too high and disproportionate to the revenue generated. Besides, the huge compliance cost to be incurred by small enterprises under GST can be disproportionate and cumbersome. This can create a situation of double loss to the economy. It may be noted that around 90% of indirect tax revenue is estimated to come from taxpayers with an annual turnover of more than Rs 1.5 crore. Another possible goal for fixing a low threshold is to track/capture maximum low-value transactions across the economy so that the informal sector can be plugged into the formal set-up. While this goal is appreciable, compliance cost and cost of doing business should be commensurate to the profits earned.

Q. Why isn’t setting of an ideal tax exemption threshold an easy task?
(i) Because setting an ideal tax exemption is fraught with political challenges for the government
(ii) Because taxation is a dynamic concept and thus it needs to be maneuvered as per the need of the hour
(iii) Because of the difficulty in maintaining an equilibrium between maximum revenue collection and a minimum administrative cost