Q81. What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’?
- It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
- It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its
foreign exchange reserves. - It will enormously increase the growth and size of the economy of India and will enable it to
overtake China in the near future.
Select the correct answer using the code given below:
a) 1 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3
The correct answer is option 1.
- Goods and Services Tax (GST)
- The Goods and Services Tax (GST) is a value-added tax that is levied on the majority of goods and services sold for domestic consumption.
- While consumers pay the GST, it is remitted to the government by the businesses that sell the goods and services.
- GST is levied on the supply side, which means it applies to the ‘supply’ of goods or services.
- GST is based on the principle of destination-based consumption taxation; it will replace multiple taxes collected by multiple authorities, resulting in the creation of an Indian single market. Hence, Statement 1 is correct.
- It is a dual GST, with the Centre and the States levying tax on a common base at the same time. The GST levied by the Centre is known as Central GST (CGST), while the GST levied by the States is known as State GST (SGST).
- The GST Bill was first introduced in India in 2014 as the 122nd Constitutional Amendment Bill, and it was approved in 2016 and renumbered in the statute as the 101st Constitutional Amendment Act, 2016.
- Because of crude oil imports and the OPEC cartel that manipulates its prices, GST is unlikely to ‘dramatically’ reduce the current account deficit. Hence, statement 2 is incorrect.
- Similarly, GST is unlikely to significantly increase the size of our economy because the IMF predicts a 1-1.5% increase in growth rate. We will not be able to overtake China soon because it will necessitate currency depreciation and labour exploitation. Hence, statement 3 is incorrect.
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