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:
- 1 only
- 2 and 3 only
- 1 and 3 only
- 1, 2 and 3
Explanation
Statement 1 is correct
- GST unified India’s tax system, creating a single market that removed interstate barriers and boosted operational efficiency. It ended tax cascading by allowing businesses to claim input tax credit across the supply chain, reducing overall tax burden and simplifying compliance.
Statement 2 is incorrect
- It significantly affects the domestic tax system and structure by simplifying and unifying various indirect taxes under one framework. However, it has no direct impact that will drastically reduce the ‘Current Account Deficit’ and increase India’s foreign exchange reserves.
Statement 3 is incorrect
- It would be inaccurate to claim that GST alone will be the reason for India’s economy surpassing China’s in the near future. Economic growth depends on multiple factors, including investment, infrastructure, labor markets, and global economic conditions, beyond just tax reforms like GST.
