Practice Quiz For IBPS, RBI Exam 2018 (English Reading Comprehension) SET-169

Practice Quiz For IBPS, RBI Exam 2018

(English Reading Comprehension)

Directions (1-11): Read the following passage carefully and answer the questions given below it. Certain words/phrases are printed in bold to help you to locate them while answering some of the questions:

The genesis of service tax emanates from the ongoing structural transformation of the Indian economy, whereby presently more than one-half of GDP originates from the services sector. Despite the growing presence of the services sector in the Indian economy, it remained out of the tax net prior to 1994-95, leading to a steady deterioration in tax-GDP ratio. The service tax was introduced in 1994-95 on a select category of services at a low rate of five percent. While the service tax rate and the coverage of services being taxed have increased ever since, the combined tax-GDP ratio of the Centre and States, nevertheless, deteriorated from 16.4 percent in 1985-86 to 14.1 percent in 1999-2000. It may be noted that between 1990-91 and 1998-99, the share of industrial sector in GDP dropped by 6.4 percentage points whereas almost 64 percent of the tax revenue was generated by indirect taxes for which industrial sector continues to be the principal tax base. On the other hand, during the same period, the share of services sector in GDP has increased by 10 percentage points and this sector has still remained poorly taxed.

The rationale for service tax, therefore, lies not only in arresting the falling tax-GDP ratio but also in ipso facto improving allocative efficiency in the economy as well as promoting equity. Against this backdrop, the service tax needs to be designed taking into account the fact that (i) the share of services in GDP is expanding; (ii) failure to tax services distorts consumer choices and encourages spending on services at the expense of goods; (iii) untaxed service traders are unable to claim value added tax (VAT) on service inputs, which encourages businesses to develop in-house services, creating further distortion and (iv) most services that are likely to become taxable are positively correlated with expenditure of high-income households and, therefore, service tax improves equity.

In the Indian context, taxation of services assumes importance in the wake of the need for improving the revenue system, ensuring a measure of neutrality in taxation between goods and services and eventually helping to evolve an efficient system of domestic trade taxes, both at the Central and the State levels.

The coverage of services under tax net has been progressively widened over the years. With effect of the Finance Act, 2004. 71 services are presently contributing to the service tax collections. The service tax is applicable to all parts of India except the State of Jammu and Kashmir and is leviable on the gross amount charged by the service provider from the client. The rate of service tax was increased from 5 percent since September 10, 2004. With the increase in tax rate and base of service tax, the collections from the service tax have shown a steady rise from Rs. 410 crore in 1994-95 to Rs. 8,300 crore in 2003-04; however, they accounted for only 4.4 percent of the total tax receipts of the Centre (0.3 percent of GDP) in 2003-04.

Service tax is envisaged as the tax of the future. The inclusion of all value added services in the tax net would yield a larger amount of revenue and make the existing tax structure more elastic. Once the service sector is adequately covered under tax net, the buoyant services sector will enable the reversal of declining trend in tax buoyancy. Besides raising the revenue buoyancy, appropriate taxation of services sector would also provide equity, efficiency and consistency in the tax administration as well as neutrality for various economic activities. Integration of services sector to the tax net would be the prelude to the introduction of a full-fledged VAT system.

Q1. What according to the passage, was the impact of exclusion of service tax till the first half of the last decade of the past century?
(a) There was no impact as there was no service tax.
(b) There was a steady deterioration in the GDP.
(c) Tax-GDP ratio has steadily and gradually aggravated.
(d) Service sector used to flourish exorbitantly.
(e) None of these

Q2. The origin of service tax is attributed to __________
(a) increase in Gross Domestic Product (GDP)
(b) existence of service sector
(c) tax of the future
(d) metamorphosis of our country’s economy
(e) enormous growth potential of industrial sector

Q3. Which of the following is MOST likely to provide neutrality to various economic activities?
(a) Increase in revenue buoyancy
(b) Fairness in tax administration
(c) Equity and efficiency in various activities.
(d) Consistency in tax structure and revenue buoyancy
(e) None of these

Q4. What is the probable impact of bringing all value added services under the tax net?
(A) It will yield a larger revenue.
(B) It will provide flexibility to the present tax structure.
(C) It will progressively decrease tax buoyancy.
(a) A and C only
(b) B and C only
(c) A and B only
(d) All the three
(e) None of these

Q5. When the author mentions that the service taxes constitute 0.3 percent of GDP, he implies that __________
(a) it is a substantially high amount
(b) the service taxes show a very progressive trend
(c) it is a very small amount
(d) there is no scope for further increase
(e) None of these

Q6. Levying service tax is most likely to achieve which of the following?
(A) Check on reducing Tax-GDP ratio
(B) Enhancement in allocative efficiency
(C) Promoting equality
(a) A and B only
(b) B and C only
(c) A and C only
(d) All the three
(e) None of these

Q7. Which of the following statements is/are definitely true in the context of the passage?
(A) The orbit of service tax has been increased to encompass more and more services.
(B) Despite increasing the coverage of service tax, the actual tax collection is deteriorating significantly.
(C) Despite widening tax net to bring more and more services under it the combined Tax-GDP ratio of Centre and States was reduced during 1986-2000.
(a) A and B only
(b) A and C only
(c) B and C only
(d) All the three
(e) None of these

Q8. Which of the following factors helps service tax improve fairness across different economic strata of society?
(a) Taxable services are mostly those that are utilised by the rich
(b) Untaxed service traders are prevented from claiming value added tax
(c) Encouragement to in-house services is effected
(d) It improves revenue system
(e) None of these

Q9. According to the author, the service tax is the tax of the future because __________
(a) it will be levied in near future
(b) its implementation will be effected in the next decade
(c) its significant impact will be visible at a later period
(d) the future of the nation is largely dependent on it
(e) None of these

Q10. Which of the following is likely to happen if services are NOT brought under the tax net?
(A) Misrepresentation of customers’ choices
(B) Stimulating enhancement in spending on services at the cost of goods
(C) Inability of tax payers to reclaim their taxes already paid by them
(a) A and B only
(b) B and C only
(c) A and C only
(d) All the three
(e) None of these

Q11. The author of the passage seems to be having __________
(a) an antagonistic attitude about levying service tax
(b) a favourable attitude towards levying service tax
(c) a sympathetic and lenient view regarding untaxed service traders
(d) a distorted view about equity
(e) a soft corner for the tax payers brought under service tax net

Directions (12-13): Choose the word/group of words which is most nearly the SAME in meaning as the word given in bold as given in the passage.

Q12. NET
(a) Actual amount
(b) Amount after tax
(c) Governance
(d) Coverage
(e) Mesh

(a) Implement
(b) Visualize
(c) Endure
(d) Encompass
(e) Expect

Directions (14-15): Choose the word/group of words which is most OPPOSITE in meaning of the word given in bold as given in the passage.

(a) Gradually
(b) Abruptly
(c) Occasionally
(d) Narrowly
(e) Ineffectively

(a) Flexible
(b) Unreliable
(c) Faulty
(d) Untenable
(e) Rigid

ANSWER KEYS: 1. Ans.(b)  2. Ans.(d) 3. Ans.(d) 4. Ans.(c) 5. Ans.(c) 6. Ans.(d) 7. Ans.(b) 8. Ans.(b) 9. Ans.(e) 10. Ans.(a) 11. Ans.(b) 12. Ans.(d) 13. Ans.(b) 14. Ans.(b) 15. Ans.(e)