In 2001 - 02, excise duty structure was rationalized to a single rate of _____ per cent CENVAT (Central Value Add Tax).
Show answer & explanation
Correct answer: A
Explanation
The correct answer is Option 1: 16.
Explanation:
In the Union Budget for the year 2001-02, to simplify indirect taxes, the structure of Excise Duty was rationalized to a single rate of 16 percent CENVAT (Central Value Added Tax). Prior to this, there were numerous different rates of excise duty, which made the tax system complex. The primary objective of this reform was to curb tax evasion and introduce transparency within the manufacturing sector.
Additional Facts:
- CENVAT: Its full form is 'Central Value Added Tax'. It was a tax levied on manufactured goods.
- MODVAT: Preceding CENVAT, 'MODVAT' (Modified Value Added Tax) was introduced in 1986.
- The Advent of GST: Following the implementation of the GST (Goods and Services Tax) on July 1, 2017, most indirect taxes—such as Excise Duty and CENVAT—were abolished.
- Objective: The goal of the single 16% rate was to mitigate the 'cascading effect' (tax on tax).
Potential Questions for Upcoming Exams:
Question: On what date was the Goods and Services Tax (GST) implemented in India?
Answer: July 1, 2017.
Question: What is the full form of CENVAT?
Answer: Central Value Added Tax.
Question: In India, based on the recommendations of which committee was the VAT system first discussed?
Answer: The L.K. Jha Committee.