UPSC Prelims 2017 Question:

What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’?

1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India. 
2. It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves. 
3. 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:

Explanation: 

• The Goods and Services Tax (GST) is a destination-based, value-added tax that was introduced in India on July 1, 2017, as a substantial indirect tax reform intended to streamline the tax structure and create one nation, one tax, and one market in India.
  

• Benefits of Goods and Services Tax:

• Ending decades of twists and turns, GST subsumed 17 large taxes and 13 cesses. With uniform tax on supplies of goods and services, India turned into one market. So, statement 1 is correct.
• Tax base has doubled in GST
• Goods now move faster
• Refunds come quickly
• Consumer gains with reduced tax burden on items of consumption

• However, there is no substantial evidence that suggests GST would drastically reduce the Current Account Deficit of India or it will enable India to take over China in the near future or not. So, statements 2 and 3 are not correct.

• A current account deficit occurs when the total value of goods and services a country imports exceeds the total value of goods and services it exports.
  
  

Therefore, option (1) is the correct answer.

Subject: Economics | Taxation