Taxation Interview Questions and Answers - 3
18. Explain the benefits of Goods and Services Tax, GST.The biggest benefit of GST is an elimination of multiple indirect taxes. GST is a comprehensive indirect tax that is designed to bring the indirect taxation under one umbrella. It eliminates the cascading effect of tax. Cascading tax effect can be best described as ‘Tax on Tax’.
A consultant offering services for say, Rs 100,000 and charged a service tax of 15% (Rs 100,000 * 15% = Rs 15,000).
Then say, he would buy office supplies for Rs. 40,000 paying 5% as VAT (Rs 40,000 *5% = Rs 2,000).
He had to pay Rs 15,000 output service tax without getting any deduction of Rs 2,000 VAT already paid on stationery.
His total outflow is Rs 17,000.
GST on service of Rs 100,000 @18% 18,000
Less: GST on office supplies (Rs 40,000*5%) 2,000
Net GST to pay 16,000
19. What is Output GST?GST on sales is called Output GST. It is also called GST Liability
20. What is Input GST?GST on purchases is called Input GST.
21. What is GST Payable?Output GST - Input GST = GST Payable
22. What is GST Credit?If Input GST is more than Output GST it is called GST Credit. We calculate it separately for different types of GST
23. What is Payroll?Payroll is the pay sheet which records the wage rates, deductions and net pay for workers and employees during a given period.
24. What is Gratuity? Gratuity is a sum of money paid by an employer to an employee for services rendered in the company. However, gratuity is paid only to employees who complete 5 or more years with the company.
25. How do you calculate Gratuity?Gratuity = (Last basic pay * 15 days * Number of year service) / 26 days
Suppose Ronnie last drawn basic pay is Rs 72,000 per month and he has worked with XYZ Ltd for 20 years. In this case, using the formula above, gratuity will be calculated as:
(15 X 72,000 X 20)/26 = Rs. 8.30 lakh