Taxation is one of the primary ways governments generate revenue to fund the different public services, such as healthcare, education, and infrastructure, for the citizens. There are different types of taxes, and the laws may be different across India. So it is important for organisations and individuals to stay up to date on tax laws and regulations.
The tax interview questions used in this blog can be helpful if you are preparing for a tax specialist job role. These questions can help you show your knowledge and highlight your communication skills for sharing that knowledge effectively. The tax interview covers different topics such as tax planning and preparation, tax compliance, tax research, laws, and more.
Tax Interview Questions
1. What is the definition of a tax?
Taxes are the source of revenue for the government. They are used for a wide range of public services and initiatives, and they are imposed on the different forms of income, including wages, gains on investments, property sales, and goods and services that are purchased by consumers. The tax policies, rates, and types of taxes are different for each country.
2. Explain Taxation.
Taxation is the process by which the government raises revenue to fund its operations and provides public goods and services. It plays an essential role in the state, ensuring sustainability and stability, and is a vital component of a well-functioning economy. Tax policies, rates, and regulations often create a political debate as different opinions on how it should be paid and who should pay.
3 . Define Direct tax.
Direct taxes are imposed on the income, profit, or salary of individuals or organizations. They provide a more stable source of government revenue when compared with indirect taxes. This tax cannot be passed on to others, and it is considered a progressive form of taxation because it is paid by the individual or organization on which the tax is imposed. Some examples of direct taxes include income tax, corporate tax, and property tax.
4. Define Indirect taxes
The taxes that are imposed on goods and services instead of on salary or income are called indirect taxes. They are typically added to the final price of a product, and this burden is passed to the consumer. Some of the examples of indirect taxes include sales tax, value-added tax (VAT), and excise duties. These taxes are considered regressive because they are a large portion of the individuals with low salaries. The advantage of this tax is that it can be easily managed and collected, because it is imposed at the point of sale or import.
5. Explain the history of the Tax regime in India.
The history of taxation in India dates back to ancient times, and it has evolved over the decades. During the British rule, the tax system of India underwent many changes, such as introducing a modern tax system and an indirect tax system. After gaining independence, the Indian government decided to continue and develop the tax system by introducing new taxes and reforming the existing ones. In the 1990s, India underwent many important changes in the tax reforms, such as introducing value-added tax (VAT) and simplifying the tax code. Now the tax system of India includes a mix of direct and indirect taxes, where the government is relying on the income tax, corporate tax, indirect tax, and other taxes to raise revenue.
6. Explain the term GST
The full form of GST is Goods and Services Tax. It is an indirect tax introduced in India in 2017. It is charged at every stage of the supply chain, from production to final consumption. This replaces the multiple indirect taxes, including VAT, excise duty, and service tax throughout the country. The GST is collected by the central government, and it is divided between the central and state governments based on the formula set by the GST Council. The GST regime has created a single market for goods and services to reduce the cascading effect of different taxes and make business easier.
7. Explain the features of GST
The complete, multi-staged, destination-based nature of GST with the input tax credits, uniform tax rates, a self-policing system, and centralised electronic administration has improved the compliance, which helps to make the tax system efficient and transparent in India.
8. What is Income tax?
Income tax is the tax that is collected by the government from capital gains and income from other sources. The collected income tax collected by the government is used for funding public spending on goods and services such as infrastructure, education, healthcare, and defence, for calculating the income tax liability by including the account deductions and exemptions that are under the tax laws.
9. Define GST Council
The GST Council is the government body that designs and implements GST. The members of this council include the Union Finance Minister as its Chairperson, the Union Minister of State in charge of revenue, and the Finance Ministers of all states. This council operates under a consensus-based decision-making process.
10. How do you know about the latest tax laws, regulations, and rules?
It is important to stay updated on changes in the tax laws of the state that can impact your business operations inside the state. The state government changes its law to support small, medium, or large companies while reducing the burdens of the administration. This can cause changes in the tax forms and other areas of the legislation.
For staying updated about these changes, it is a better way to check the website of the Tax and Accountboards, and the government to get summaries and blogs of the new changes. Staying informed about changes in the state’s tax laws can help businesses stay compliant and avoid penalties or legal issues.
11. Define GST Registration
Every business has to do GST registration if its turnover is more than the threshold limit, and it provides the taxpayer with a GSTIN, which should be quoted for all the invoices. In the GST registration, you have to submit the required documents, like a PAN card and bank account details, to the government. If the registration is approved, then the taxpayer must comply with GST obligations such as periodic GST returns and remitting the taxes that are owed to the government.
12. Explain the Tax invoice
A tax invoice is an important document under the GST system. It is used to determine the liability to pay tax, claim input tax credits, and acts as proof of the supply of goods and services. Under the GST laws and rules, the format and contents of the tax invoices are specified, and businesses must issue the tax invoice for all the taxable supplies. An incorrect invoice or failing to issue an invoice can cause penalties or fines under the GST system.
13. Define the composition scheme
The main goal of the composition scheme under the GST is to simplify and make the tax compliance easy for the taxpayers with a turnover of up to 1.5 crore. With this scheme, they can pay the flat rate for their overall turnover instead of paying the taxes on each transaction at the rate decided by the GST council, and it is lower than the regular GST rate.
14. Explain the E-way bill
It is a document that is mandatorily required for the movement of goods over 50,000 rs, within or outside a state. It includes the details of the consignor and consignee, goods that are transported, value of goods, GST rate, and vehicle number. It is used for tracking the movement of goods and preventing evasion of taxes. An e-way bill is generated by using the GSTN portal, and it is an important component of the GST compliance process in India.
15. Define GST Returns
The GST return is a statement that is submitted by a taxpayer to show the details of their supplies, input tax credits, and tax liabilities. It is used by tax authorities to check the compliance and tax liability of the taxpayer. In the GST Regime in India, GST returns play an important role as they provide the tax authorities with the required information for monitoring and enforcing compliance with the GST laws and regulations.
Conclusion
Preparing for tax interviews requires a strong understanding of the taxation principles, GST regulations, and the tax interview questions and answers in this blog can help you to refresh and get a solid foundation for attending interviews. These questions help to check your technical knowledge and practical awareness.
Enrolling in a tax certification course can be an excellent way to prepare for interviews and advance your career in the accounting and finance sector. This course can provide a complete understanding of tax laws, regulations, and different procedures, and can help you to get skills and knowledge for excelling in your career.
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