UPSC Prelims 2014 GS Paper I · Q27 of 100 Economy easy

The sales tax you pay while purchasing a toothpaste is a

  1. (a) tax imposed by the Central Government
  2. (b) tax imposed by the Central Government but collected by the State Government
  3. (c) tax imposed by the State Government but collected by the Central Government
  4. (d) tax imposed and collected by the State Government ✓ UPSC's answer

Why the answer is (d)

• Before GST, sales tax/VAT on goods sold within a State was levied under List II (entry 54) and collected by the State Government — option (d).

• Central sales tax on inter-State sales was levied by the Centre but collected and retained by States; but ordinary retail purchase of toothpaste attracted State VAT.

• Since 2017 GST has replaced VAT, with SGST going to the State and CGST to the Centre.

• Hence option (d).

Why the other options are wrong

(a) tax imposed by the Central Government
Sales tax on intra-State sales is a State tax.
(b) tax imposed by the Central Government but collected by the State Government
Sales tax is not a Central levy collected by States (that is stamp duty etc.).
(c) tax imposed by the State Government but collected by the Central Government
States both impose and collect sales tax.

Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2014, held on 24 August 2014. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.

Reading the answer is not the same as getting it right under a clock. Practise this question with UPSC's negative marking, and anything you miss goes into an error notebook until you get it right twice.

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