2018 GS Paper I, all questions

UPSC Prelims 2018 · GS Paper I

Question 8: Economy and Social Development

With reference to India’s decision to levy an equalization tax of 6% on online advertisement services offered by non-resident entities, which of the following statements is/are correct ?

  1. 1.It is introduced as a part of the Income Tax Act.
  2. 2.Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the “Double Taxation Avoidance Agreements”.

Select the correct answer using the code given below :

a1 only
b2 only
cBoth 1 and 2
dNeither 1 nor 2

AnswerUPSC’s answer is (d).

The 6 per cent equalisation levy on online advertisement payments to non-residents was brought in through the Finance Act, 2016 (Chapter VIII), as a separate levy and not under the Income Tax Act. Because it is not an income tax, it falls outside the double taxation avoidance agreements, so a non-resident cannot claim credit for it in the home country. Remember: the equalisation levy sits outside both the Income Tax Act and the DTAAs.

  • 1. It was introduced through the Finance Act, 2016, not the Income Tax Act.
  • 2. Being outside the Income Tax Act, it earns no DTAA tax credit abroad.

How you could have got this

  1. If you were sure statement 1 is not correct, (a) and (c) go: each of them includes 1.

    What you needed to know: It was introduced through the Finance Act, 2016, not the Income Tax Act.

  2. Then, if you were sure statement 2 is not correct, (b) goes: it includes 2.

    What you needed to know: Being outside the Income Tax Act, it earns no DTAA tax credit abroad.

Only (d) is left. This one needs every statement.

Which options go is worked out from UPSC’s key and the options, not by a model.

Why each option is right or wrong
  • (a) Wrong: the levy sits in the Finance Act, 2016, not the Income Tax Act.
  • (b) Wrong: no DTAA credit is available because it is not an income tax.
  • (c) Wrong: both statements are false.
  • (d) Right: both statements are false.

Worth knowing: The 6 per cent levy on online advertisement was withdrawn with effect from 1 August 2024.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2018, General Studies Paper I, Series A. The paper on upsc.gov.in.