Daily Quiz: UPSC Prelims Marathon- August 1

Statement 1 is incorrect:

The given statement holds true for Forward charge and not reverse charge. The correct explanation of reverse charge is as follows-

Reverse charge means the liability to pay tax is by the recipient of goods/services instead of the supplier.

Reverse charge, where the recipient is liable to pay tax, is common to many countries like Canada where it is applicable on imports of services and intangible properties. Normally, the supplier pays the tax on supply. In certain cases, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed which is why it is called reverse charge.

Statement 2 is correct:

The concept of reverse charge mechanism is already present in service tax. In GST regime, reverse charge may be applicable for both services as well as goods.

Statement 3 is correct:

In India, this is a partly new concept introduced under GST.  The purpose of this charge is to increase tax compliance and tax revenues. Earlier, the government was unable to collect service tax from various unorganized sectors like goods transport. Compliances and tax collections will therefore be increased through reverse charge mechanism.

Statement 1 is correct:

The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. The Insolvency and Bankruptcy Board of India (IBBI) is established on October 1, 2016 in accordance with the provisions of The Insolvency and Bankruptcy Code, 2016

IBBI is given statutory powers through the Insolvency and Bankruptcy Code.

Statement 2 is incorrect:

It functions under Ministry of Commerce.

Statement 3 is incorrect:

Powers of appointment is conferred to the Central Government, by IBC( 2016), for a period of five years or up to sixty-five years of age or until further orders, whichever is the earlier.

Statement 4 is incorrect:

It covers Individuals, Companies, Limited Liability Partnerships and Partnership firms.

Double Financial Repression is a phenomenon when the banks are faced with financial repression both on the asset and liability side.

Repression on asset side:

Financial repression on asset side is due to SLR requirement (Statutory Liquidity Ratio) i.e. the amount of liquid assets which banks are required to hold in form of cash, government bonds and gold.

Provision of 40% of Priority Sector Lending has led the allocation of cash to less than fully efficient ways.

Repression on Liability side:

Financial repression on the liability side is the result of continued inflation since 2007. This has had a direct effect on real interest rates and hence reduction in household savings as people has to spend more on daily food items.

• The Banking Regulation (Amendment) Bill 2017 will amend The Banking Regulation Act 1949, giving the government power to authorize the Reserve Bank of India to issue directions to banks in order to initiate insolvency resolution in case of a default.
• Under the provisions of the Bill, the government can also authorizes the RBI to issue directions to banks with regard to resolution of stressed assets and allow it to name one or more committees to provide them with advice in order to do so.
• Before the Bill was introduced in Parliament, the NPA ordinance amended The Banking Regulation Act 1949 in the same way. Ordinances, however, have to be approved by Parliament within six weeks of session following the introduction.
• Apart from empowering the RBI in the above-mentioned ways, the Bill will also give RBI the authority to refer NPA cases to the Insolvency and Bankruptcy Board.

Important learning about Pradhan Mantri vaya Vandana Yojana:

• It is a pension scheme exclusively for senior citizens aged 60 years and above.
• Scheme provides an assured return of 8% p.a. payable monthly (equivalent to 8.30% p.a. effective) for 10 years.
• Pension (minimum: Rs.1000/ month; maximum: Rs.5000) will be payable at the end of each period, during the policy term of 10 years, as per the frequency of monthly, quarterly, half-yearly, yearly as chosen by the pensioner at the time of purchase.
• It is exempted from goods and services (GST) tax.
• It will offer senior citizens more avenues to earn steady regular income at a time of falling interest rates.
• On survival of the pensioner to the end of the policy term of 10 years, the purchase price of the scheme along with the final pension instalment will be payable.
• . The scheme allows for premature exit for the treatment of any critical terminal illness of self or spouse.  On such premature exit, 98% of the purchase price would be refunded.

On death of the pensioner during the policy term of 10 years, the purchase price should be paid to the beneficiary.

Statement 1 is incorrect:

Special drawing rights (SDR) refer to an international type of monetary reserve currency created by the International Monetary Fund (IMF) in 1969

It operates as a supplement to the existing reserves of member countries.

Created in response to concerns about the limitations of gold and dollars as the sole means of settling international accounts, SDRs augment international liquidity by supplementing the standard reserve currencies.

Important learning:

According to RBI, India’s foreign exchange (Forex) reserves have touched a record high of $386.539 billion in June 2017.

The components of India’s Foreign Exchange Reserves include:

• Foreign currency assets (FCAs),
• Special Drawing Rights (SDRs),
• Gold and,
• RBI’s Reserve position with International Monetary Fund (IMF).

Disinvestment proceeds falls under the category of capital receipt and not revenue receipts.

Important learning:

Revenue Receipt is of two types viz. Tax Revenue and Non-tax revenue.

Tax Revenues

• It is of the form direct taxes or indirect taxes. Example of direct tax is Income Tax, Gift Tax, Wealth Tax and Property tax.
• Indirect tax is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer).
• Sales tax, Value Added Tax (VAT), Goods and Services tax (GST) or any other such tax is an indirect tax.

Non-Tax Revenue

• Money which the Government earns as “Dividends and profits” from its profit making public enterprises (PSUs).
• Interest which the Government earns on the money lent by it to external or internal borrowers.
• The money which the government receives out of its fiscal services such as stamp printing, currency printing, medal printing etc.
• Money which the Government earns from its “General Services” such as power distribution, irrigation, banking services, insurance, and community services etc. which make the part of the Government business.
• Money which the government accrues as fees, fines, penalties etc.
• Grants the Government of India receives from the external sources. In case of the state Governments, it may be the internal grant from the central Government.