Reading Comprehension
Reading Comprehension: English Reading Comprehension Exercises with Answers, Sample Passages for Reading Comprehension Test for GRE, CAT, IELTS preparation
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English Reading Comprehension Test Questions and Answers. Improve your ability to read and comprehend English Passages
Q286. > The genesis of service tax emanates from the ongoing structural
> transformation of the Indian economy, whereby presently more than
> one-half of GDP originates from the services sector. Despite the
> growing presence of the services sector in the Indian economy, it
> remained out of the tax net prior to 1994-95, leading to a steady
> deterioration in tax-GDP ratio. The service tax was introduced in
> 1994-95 on a select category of services at a low rate of five
> percent. While the service tax rate and the coverage of services being
> taxed have increased ever since, the combined tax-GDP ratio of the
> Centre and States, nevertheless, deteriorated from 16.4 percent in
> 1985-86 to 14.1 percent in 1999-2000. It may be noted that between
> 1990-91 and 1998-99, the share of industrial sector in GDP dropped by
> 6.4 percentage points whereas almost 64 percent of the tax revenue was generated by indirect taxes for which industrial sector continues to
> be the principal tax base. On the other hand, during the same period,
> the share of services sector in GDP has increased by 10 percentage
> points and this sector has still remained poorly taxed. The rationale
> for service tax, therefore, lies not only in arresting the falling
> tax-GDP ratio but also in ipso facto improving allocative efficiency
> in the economy as well as promoting equity. Against this backdrop, the
> service tax needs to be designed taking into account the fact that (i)
> the share of services in GDP is expanding; (ii) failure to tax
> services distorts consumer choices and encourages spending on services
> at the expense of goods; (iii) untaxed service traders are unable to
> claim value added tax (VAT) on service inputs, which encourages
> businesses to develop in-house services, creating further distortion
> and (iv) most services that are likely to become taxable are
> positively correlated with expenditure of high-income households and,
> therefore, service tax improves equity. In the Indian context,
> taxation of services assumes importance in the wake of the need for
> improving the revenue system, ensuring a measure of neutrality in
> taxation between goods and services and eventually helping to evolve
> an efficient system of domestic trade taxes, both at the Central and
> the State levels. The coverage of services under tax net has been
> progressively widened over the years. With effect of the Finance Act,
> 2004. 71 services are presently contributing to the service tax collections. The service tax is applicable to all parts of India
> except the State of Jammu and Kashmir and is leviable on the gross
> amount charged by the service provider from the client. The rate of
> service tax was increased from 5 percent since September 10, 2004.
> With the increase in tax rate and base of service tax, the collections
> from the service tax have shown a steady rise from Rs. 410 crore in
> 1994-95 to Rs. 8,300 crore in 2003-04; however, they accounted for
> only 4.4 percent of the total tax receipts of the Centre (0.3 percent
> of GDP) in 2003-04. Service tax is envisaged as the tax of the future.
> The inclusion of all value added services in the tax net would yield a
> larger amount of revenue and make the existing tax structure more
> elastic. Once the service sector is adequately covered under tax net,
> the buoyant services sector will enable the reversal of declining
> trend in tax buoyancy. Besides raising the revenue buoyancy,
> appropriate taxation of services sector would also provide equity,
> efficiency and consistency in the tax administration as well as
> neutrality for various economic activities. Integration of services
> sector to the tax net would be the prelude to the introduction of a
> full-fledged VAT system.
Which of the following factors helps service tax improve fairness across different economic strata of society?
- Taxable services are mostly those that are utilised by the rich
- Untaxed service traders are prevented from claiming value added tax
- Encouragement to in-house services is effected
- It improves revenue system
- None of these
Solution : Untaxed service traders are prevented from claiming value added tax
Q287. > The genesis of service tax emanates from the ongoing structural
> transformation of the Indian economy, whereby presently more than
> one-half of GDP originates from the services sector. Despite the
> growing presence of the services sector in the Indian economy, it
> remained out of the tax net prior to 1994-95, leading to a steady
> deterioration in tax-GDP ratio. The service tax was introduced in
> 1994-95 on a select category of services at a low rate of five
> percent. While the service tax rate and the coverage of services being
> taxed have increased ever since, the combined tax-GDP ratio of the
> Centre and States, nevertheless, deteriorated from 16.4 percent in
> 1985-86 to 14.1 percent in 1999-2000. It may be noted that between
> 1990-91 and 1998-99, the share of industrial sector in GDP dropped by
> 6.4 percentage points whereas almost 64 percent of the tax revenue was generated by indirect taxes for which industrial sector continues to
> be the principal tax base. On the other hand, during the same period,
> the share of services sector in GDP has increased by 10 percentage
> points and this sector has still remained poorly taxed. The rationale
> for service tax, therefore, lies not only in arresting the falling
> tax-GDP ratio but also in ipso facto improving allocative efficiency
> in the economy as well as promoting equity. Against this backdrop, the
> service tax needs to be designed taking into account the fact that (i)
> the share of services in GDP is expanding; (ii) failure to tax
> services distorts consumer choices and encourages spending on services
> at the expense of goods; (iii) untaxed service traders are unable to
> claim value added tax (VAT) on service inputs, which encourages
> businesses to develop in-house services, creating further distortion
> and (iv) most services that are likely to become taxable are
> positively correlated with expenditure of high-income households and,
> therefore, service tax improves equity. In the Indian context,
> taxation of services assumes importance in the wake of the need for
> improving the revenue system, ensuring a measure of neutrality in
> taxation between goods and services and eventually helping to evolve
> an efficient system of domestic trade taxes, both at the Central and
> the State levels. The coverage of services under tax net has been
> progressively widened over the years. With effect of the Finance Act,
> 2004. 71 services are presently contributing to the service tax collections. The service tax is applicable to all parts of India
> except the State of Jammu and Kashmir and is leviable on the gross
> amount charged by the service provider from the client. The rate of
> service tax was increased from 5 percent since September 10, 2004.
> With the increase in tax rate and base of service tax, the collections
> from the service tax have shown a steady rise from Rs. 410 crore in
> 1994-95 to Rs. 8,300 crore in 2003-04; however, they accounted for
> only 4.4 percent of the total tax receipts of the Centre (0.3 percent
> of GDP) in 2003-04. Service tax is envisaged as the tax of the future.
> The inclusion of all value added services in the tax net would yield a
> larger amount of revenue and make the existing tax structure more
> elastic. Once the service sector is adequately covered under tax net,
> the buoyant services sector will enable the reversal of declining
> trend in tax buoyancy. Besides raising the revenue buoyancy,
> appropriate taxation of services sector would also provide equity,
> efficiency and consistency in the tax administration as well as
> neutrality for various economic activities. Integration of services
> sector to the tax net would be the prelude to the introduction of a
> full-fledged VAT system.
According to the author, the service tax is the tax of the future because __________
- it will be levied in near future
- its implementation will be effected in the next decade
- its significant impact will be visible at a later period
- the future of the nation is largely dependent on it
- None of these
Solution : None of these
Q288. > The genesis of service tax emanates from the ongoing structural
> transformation of the Indian economy, whereby presently more than
> one-half of GDP originates from the services sector. Despite the
> growing presence of the services sector in the Indian economy, it
> remained out of the tax net prior to 1994-95, leading to a steady
> deterioration in tax-GDP ratio. The service tax was introduced in
> 1994-95 on a select category of services at a low rate of five
> percent. While the service tax rate and the coverage of services being
> taxed have increased ever since, the combined tax-GDP ratio of the
> Centre and States, nevertheless, deteriorated from 16.4 percent in
> 1985-86 to 14.1 percent in 1999-2000. It may be noted that between
> 1990-91 and 1998-99, the share of industrial sector in GDP dropped by
> 6.4 percentage points whereas almost 64 percent of the tax revenue was generated by indirect taxes for which industrial sector continues to
> be the principal tax base. On the other hand, during the same period,
> the share of services sector in GDP has increased by 10 percentage
> points and this sector has still remained poorly taxed. The rationale
> for service tax, therefore, lies not only in arresting the falling
> tax-GDP ratio but also in ipso facto improving allocative efficiency
> in the economy as well as promoting equity. Against this backdrop, the
> service tax needs to be designed taking into account the fact that (i)
> the share of services in GDP is expanding; (ii) failure to tax
> services distorts consumer choices and encourages spending on services
> at the expense of goods; (iii) untaxed service traders are unable to
> claim value added tax (VAT) on service inputs, which encourages
> businesses to develop in-house services, creating further distortion
> and (iv) most services that are likely to become taxable are
> positively correlated with expenditure of high-income households and,
> therefore, service tax improves equity. In the Indian context,
> taxation of services assumes importance in the wake of the need for
> improving the revenue system, ensuring a measure of neutrality in
> taxation between goods and services and eventually helping to evolve
> an efficient system of domestic trade taxes, both at the Central and
> the State levels. The coverage of services under tax net has been
> progressively widened over the years. With effect of the Finance Act,
> 2004. 71 services are presently contributing to the service tax collections. The service tax is applicable to all parts of India
> except the State of Jammu and Kashmir and is leviable on the gross
> amount charged by the service provider from the client. The rate of
> service tax was increased from 5 percent since September 10, 2004.
> With the increase in tax rate and base of service tax, the collections
> from the service tax have shown a steady rise from Rs. 410 crore in
> 1994-95 to Rs. 8,300 crore in 2003-04; however, they accounted for
> only 4.4 percent of the total tax receipts of the Centre (0.3 percent
> of GDP) in 2003-04. Service tax is envisaged as the tax of the future.
> The inclusion of all value added services in the tax net would yield a
> larger amount of revenue and make the existing tax structure more
> elastic. Once the service sector is adequately covered under tax net,
> the buoyant services sector will enable the reversal of declining
> trend in tax buoyancy. Besides raising the revenue buoyancy,
> appropriate taxation of services sector would also provide equity,
> efficiency and consistency in the tax administration as well as
> neutrality for various economic activities. Integration of services
> sector to the tax net would be the prelude to the introduction of a
> full-fledged VAT system.
Which of the following is likely to happen if services are NOT brought under the tax net?
(A) Misrepresentation of customers’ choices
(B) Stimulating enhancement in spending on services at the cost of goods
(C) Inability of tax payers to reclaim their taxes already paid by them
- A and B only
- B and C only
- A and C only
- All the three
- None of these
Solution : A and B only
Q289. > The genesis of service tax emanates from the ongoing structural
> transformation of the Indian economy, whereby presently more than
> one-half of GDP originates from the services sector. Despite the
> growing presence of the services sector in the Indian economy, it
> remained out of the tax net prior to 1994-95, leading to a steady
> deterioration in tax-GDP ratio. The service tax was introduced in
> 1994-95 on a select category of services at a low rate of five
> percent. While the service tax rate and the coverage of services being
> taxed have increased ever since, the combined tax-GDP ratio of the
> Centre and States, nevertheless, deteriorated from 16.4 percent in
> 1985-86 to 14.1 percent in 1999-2000. It may be noted that between
> 1990-91 and 1998-99, the share of industrial sector in GDP dropped by
> 6.4 percentage points whereas almost 64 percent of the tax revenue was generated by indirect taxes for which industrial sector continues to
> be the principal tax base. On the other hand, during the same period,
> the share of services sector in GDP has increased by 10 percentage
> points and this sector has still remained poorly taxed. The rationale
> for service tax, therefore, lies not only in arresting the falling
> tax-GDP ratio but also in ipso facto improving allocative efficiency
> in the economy as well as promoting equity. Against this backdrop, the
> service tax needs to be designed taking into account the fact that (i)
> the share of services in GDP is expanding; (ii) failure to tax
> services distorts consumer choices and encourages spending on services
> at the expense of goods; (iii) untaxed service traders are unable to
> claim value added tax (VAT) on service inputs, which encourages
> businesses to develop in-house services, creating further distortion
> and (iv) most services that are likely to become taxable are
> positively correlated with expenditure of high-income households and,
> therefore, service tax improves equity. In the Indian context,
> taxation of services assumes importance in the wake of the need for
> improving the revenue system, ensuring a measure of neutrality in
> taxation between goods and services and eventually helping to evolve
> an efficient system of domestic trade taxes, both at the Central and
> the State levels. The coverage of services under tax net has been
> progressively widened over the years. With effect of the Finance Act,
> 2004. 71 services are presently contributing to the service tax collections. The service tax is applicable to all parts of India
> except the State of Jammu and Kashmir and is leviable on the gross
> amount charged by the service provider from the client. The rate of
> service tax was increased from 5 percent since September 10, 2004.
> With the increase in tax rate and base of service tax, the collections
> from the service tax have shown a steady rise from Rs. 410 crore in
> 1994-95 to Rs. 8,300 crore in 2003-04; however, they accounted for
> only 4.4 percent of the total tax receipts of the Centre (0.3 percent
> of GDP) in 2003-04. Service tax is envisaged as the tax of the future.
> The inclusion of all value added services in the tax net would yield a
> larger amount of revenue and make the existing tax structure more
> elastic. Once the service sector is adequately covered under tax net,
> the buoyant services sector will enable the reversal of declining
> trend in tax buoyancy. Besides raising the revenue buoyancy,
> appropriate taxation of services sector would also provide equity,
> efficiency and consistency in the tax administration as well as
> neutrality for various economic activities. Integration of services
> sector to the tax net would be the prelude to the introduction of a
> full-fledged VAT system.
The author of the passage seems to be having __________
- an antagonistic attitude about levying service tax
- a favourable attitude towards levying service tax
- a sympathetic and lenient view regarding untaxed service traders
- a distorted view about equity
- a soft corner for the tax payers brought under service tax net
Solution : a favourable attitude towards levying service tax
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Q290. > The structure and operations of banks have undergone a rapid
> transformation in recent years. Consequent upon the revolution in
> information technology and the associated increase in competition
> financial intermediaries have become increasingly global in
> geographical coverage and universal in the financial operations,
> encompassing a wide range of activities including banking, securities
> markets activities and insurance. In the face of widespread concerns
> about declining profitability of banks, the Basel capital adequacy
> norms were enacted.
>
> Although the Basel norms helped to arrest the erosion of banks,
> capital ratios, concerns were raised regarding the mere applicability
> of baseline capital ratios in the changed environment of operation.
> The blurring of both functional as well as national divisions among
> the financial intermediaries, and the speed and complexity of
> adjustment, made it difficult for regulators to keep up with the
> growing pace change. In particular, the rule of ‘one-size-fits-all’
> aspect of the capital adequacy ratio was the subject of intense
> debate. Recent banking crisis only emphasized the point that baseline
> capital adequacy norms were not adequate to hedge against failures. In
> response to the same, the Basel Committee on Banks’ Supervision came
> out with the new Consultative Paper on Capital Adequacy. It invited
> suggestions from the policymakers, academia and other institutes all
> over the world. After taking into consideration manifold suggestions
> of the various organizations, the second Consultative Paper on Capital
> Adequacy was released. The Accord rests on three pillars; the first
> pillar of minimum capital requirement, the second pillar of
> supervisory review process and the third pillar of market discipline.
> The first pillar sets out the minimum capital requirements. The new
> framework maintains both the current definition of capital and the
> minimum requirement of 8% of capital to risk-weighted assets. The
> revised Accord will be extended on a consolidation basis to holding
> companies of banking groups. The Accord stresses upon the improvement
> in measurement of risks. The credit risk measurement methods have been
> made more elaborate than those in the existing Accord. The new
> framework also emphasizes the measurement of operational risk. For
> measuring credit risk, two options have been proposed. The first is
> the standardized approach and the second is the internal rating based
> approach. Under the standardized approach, the existing approach for
> credit risk remains conceptually the same, but the risk-weights have
> been enlarged to encompass exposures to a broad category of borrowers
> with reference to the rating provided by rating agencies.
What necessitated the creation of Basel capital adequacy norms?
- To study the profitability pattern in the banks.
- The banks wanted its capital reserve ratios to be kept above 8%.
- Regulatory body of the banks wanted to have uniform policy.
- Corporate buyers compelled the lending institutions to do so.
- None of these
Solution : None of these
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Solution :
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