UPSC Prelims Practice Questions — T.N. can lead India on revenue reform

Q1. The Revenue Augmentation Committee set up by the Government of Tamil Nadu to recommend measures for raising the State's own tax and non-tax revenues is chaired by:

  • A. N. K. Singh, who chaired the Fifteenth Finance Commission of India
  • B. Arvind Panagariya, former Vice Chairman of the NITI Aayog, New Delhi
  • C. Montek Singh Ahluwalia, former Deputy Chairman of the Planning Commission
  • D. Ashok Lahiri, an economist who served on the Fifteenth Finance Commission

Q2. Which one of the following statements correctly brings out the difference between tax buoyancy and tax elasticity?

  • A. Buoyancy measures the response of tax revenue to changes in the price level, whereas elasticity measures its response to changes in real output
  • B. Buoyancy captures the response of tax revenue to income growth inclusive of discretionary changes in tax policy, whereas elasticity isolates the response holding tax legislation constant
  • C. Buoyancy captures the response of tax revenue to income growth holding tax legislation constant, whereas elasticity additionally incorporates discretionary changes in tax policy
  • D. Buoyancy is computed only for indirect taxes such as GST and excise, whereas elasticity is computed only for direct taxes such as income and corporation tax

Q3. A study conducted for the Fifteenth Finance Commission examined fourteen years of Tamil Nadu's tax performance. In how many of those years was the State's tax buoyancy found to be below one?

  • A. Four
  • B. Eight
  • C. Ten
  • D. Eleven

Q4. In a State government's budget, which one of the following constitutes the principal item on the financing side rather than a receipt of revenue?

  • A. Royalties collected by the State on mining leases granted within its territory
  • B. Dividends and profits remitted to the State by its public sector enterprises
  • C. The State's share in central taxes devolved on the recommendation of the Finance Commission
  • D. Net market borrowings raised by the State, which add to its outstanding liabilities

Q5. Consider the following inflows into a State's Consolidated Fund: (i) State GST collections; (ii) proceeds of State Development Loans raised in the market; (iii) interest received on loans advanced by the State to its public sector undertakings; (iv) grants-in-aid received from the Union Government. How many of the above are classified as revenue receipts?

  • A. Only one
  • B. Only two
  • C. Only three
  • D. All four

Q6. Reports on the revenue sector of the Government of Tamil Nadu, which scrutinise shortfalls and leakages in State tax collection, are prepared and submitted to the State Government for being laid before the Legislature by:

  • A. The Public Accounts Committee of the Tamil Nadu Legislative Assembly
  • B. The Comptroller and Auditor General of India
  • C. The Finance Commission constituted by the President under Article 280
  • D. The Commercial Taxes and Registration Department of the State

Q7. In Tamil Nadu's budget for 2024-25, which one of the following was estimated to be the single largest source of the State's own tax revenue?

  • A. State excise duty levied on the manufacture and sale of liquor
  • B. Stamp duty and registration fees on the transfer of immovable property
  • C. Sales tax and value added tax, levied mainly on petroleum products
  • D. State Goods and Services Tax collected on intra-State supplies

Q8. In the horizontal devolution formula adopted by the Fifteenth Finance Commission, the criterion carrying the highest weight is 'income distance'. It refers to:

  • A. The gap between a State's per capita income and the all-India average per capita income in the relevant reference period
  • B. The shortfall of a State's per capita income from the level required to eliminate its assessed revenue deficit
  • C. The distance of a State's income, measured as average per capita GSDP, from that of the State with the highest income
  • D. The difference between a State's per capita own tax revenue and its per capita gross State domestic product

Q9. Consider the following receipts of a State government: (i) royalties on mining; (ii) interest earned on loans advanced by the State; (iii) dividends from State public sector enterprises; (iv) receipts from State lotteries; (v) the State's share of central taxes devolved to it. How many of the above are classified as the State's own non-tax revenue?

  • A. Two
  • B. Three
  • C. Four
  • D. All five

Q10. In the decision-making of the GST Council constituted under Article 279A, which one of the following carries the single largest weight of votes?

  • A. The Union Minister of State for Finance, whose vote carries the Centre's entire weightage of two-thirds
  • B. The State with the largest share in GST collections, whose vote is weighted in proportion to that share
  • C. The Union Finance Minister as Chairperson, who exercises a casting vote in addition to a one-fourth weightage
  • D. The Central Government, whose vote carries a weightage of one-third of the total votes cast

Q11. Anoop Singh, who served as a Member of the Fifteenth Finance Commission, had earlier held which one of the following positions at the International Monetary Fund?

  • A. Deputy Managing Director of the Fund, with oversight of its surveillance work
  • B. Director of the Asia and Pacific Department of the Fund
  • C. Director of the Fiscal Affairs Department of the Fund
  • D. Chief Economist and Director of the Research Department of the Fund