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IIMB GST Assessment 1 Answers 2025

📚 Assessment 1 – Introduction to GST

Due date: 7th September 2025, 23:59 IST
Status: Assignment not submitted

This week’s assessment tests fundamental concepts of taxation in India, focusing on the shift from the pre-GST system to the Goods and Services Tax (GST) framework.

Q1. Which of the following is a direct tax?

  • Service Tax

  • VAT
    ✅ Income Tax

  • GST

Explanation:
Direct taxes are paid directly by individuals or organizations to the government. Income Tax is a direct tax, while GST, VAT, and Service Tax are indirect taxes.

Q2. Which of the following was NOT an indirect tax imposed by the central government before GST?

  • Excise Duty

  • Service Tax
    ✅ VAT

  • Central Sales Tax

Explanation:
VAT was levied by state governments, not the central government. Central taxes included Excise Duty, Service Tax, and CST.

Q3. What is the term used for the ‘tax-on-tax’ effect in the pre-GST system?

  • Tax rebate

  • Input tax credit
    ✅ Cascading effect

  • Tax subsidy

Explanation:
The cascading effect occurs when tax is levied on a value that already includes tax, leading to “tax on tax.” GST eliminated this issue by introducing seamless Input Tax Credit.

Q4. Which one of the following is a correct pairing of tax type and payer before GST?

  • Excise Duty – Buyer

  • Service Tax – Consumer

  • Income Tax – Seller
    ✅ Purchase Tax – Buyer

Explanation:
Purchase Tax was directly paid by the buyer. Excise and Service Tax were collected indirectly, while Income Tax is borne by the income earner.

Q5. Which of the following is NOT a stated outcome or benefit of GST implementation?

  • Reduced compliance costs
    ✅ Increased tax fragmentation

  • Creation of a unified national market

  • Elimination of cascading tax effect

Explanation:
GST’s objective was to reduce fragmentation, unify the tax system, and lower compliance costs, not increase them.

Q6. GST is a ______ based tax.

  • Origin
    ✅ Destination

  • Production

  • Wholesale

Explanation:
GST is a destination-based tax — revenue goes to the state where goods/services are consumed, not produced.

Q7. Which GST component is levied by the central government and shared with the consuming state?

  • SGST
    ✅ IGST

  • UTGST

  • CGST

Explanation:
IGST (Integrated GST) is levied on inter-state transactions by the Centre, which then distributes it to the destination state.

Q8. What rate of GST is charged on luxury cars?

  • 5%

  • 12%

  • 18%
    ✅ 28%

Explanation:
Luxury cars fall in the highest GST slab of 28%, often with additional cess to discourage consumption of luxury goods.

Q9. A trader in Tamil Nadu sells goods worth ₹20,000 to a dealer in Kerala at an 18% GST rate. What is the amount of IGST and who collects it?

  • ₹3,600, Tamil Nadu
    ✅ ₹3,600, Central Government

  • ₹1,800 CGST + ₹1,800 SGST

  • ₹3,600, Kerala Government

Explanation:
For inter-state sales, IGST = ₹20,000 × 18% = ₹3,600. The central government collects IGST and later distributes it to Kerala (the destination state).

Q10. Which of the following is NOT eligible for claiming Input Tax Credit (ITC)?

  • Manufacturer

  • Wholesaler

  • Retailer
    ✅ Final consumer

Explanation:
Only businesses (manufacturers, wholesalers, retailers) can claim ITC to avoid double taxation. Consumers cannot claim ITC.

Q11. Which country was the first to introduce GST?

  • India

  • Canada
    ✅ France

  • Australia

Explanation:
France introduced GST in 1954, becoming the first country to implement this modern tax system.

Q12. Who chaired the Empowered Committee of State Finance Ministers to work on GST?

  • Yashwant Sinha

  • Arun Jaitley
    ✅ Asim Das Gupta

  • Vijay Kelkar

Explanation:
The GST framework was developed by the Empowered Committee chaired by Asim Das Gupta, former Finance Minister of West Bengal.

Q13. Which key recommendation of the Kelkar Committee was not adopted in the final GST model?

  • Unified tax base

  • Elimination of cascading effect

  • IT-enabled tax system
    ✅ Single GST instead of dual structure

Explanation:
India adopted a dual GST model (CGST + SGST), not a single GST, due to federal structure and state taxation powers.

Q14. Why was the GST Bill introduced by the UPA government in 2011 not passed?

  • Lack of financial viability

  • Disapproval by the President
    ✅ Objections from the Chief Minister of Gujarat and other states

  • Global opposition to GST

Explanation:
Several states, led by Gujarat, opposed GST in 2011, fearing revenue losses and erosion of fiscal autonomy.

Q15. What is the structure of GST in India called?

  • Tripartite Model
    ✅ Dual GST Model

  • Single National GST

  • Central GST Model

Explanation:
India follows a Dual GST Model, with taxes levied by both the Centre (CGST, IGST) and the States (SGST, UTGST).

📌 Summary

Week 1 introduced the transition from multiple indirect taxes to GST.
Key learnings:

  • Pre-GST, taxes like Excise, VAT, Service Tax, CST caused a cascading effect.

  • GST simplified the system with a destination-based, dual structure (CGST, SGST, IGST).

  • Benefits: elimination of cascading tax, reduced compliance costs, and creation of a unified national market.

  • India’s GST design was influenced by global models, particularly France (first to adopt GST in 1954), but adapted to India’s federal system.