UPSC Prelims 2017 Q81: Indian Economy – Taxation
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 economy of India and will enable it to
overtake China in the near future.
- (a) 1 only
- (b) 2 and 3 only
- (c) 1 and 3 only
- (d) 1, 2 and 3
Answer: (a) 1 only
Explanation
Advantages of the Goods and Services Tax (GST)
GST began on 1 July 2017 under the 101st Constitutional Amendment Act, 2016.
It is a destination-based tax on the supply of goods and services.
| Statement | Verdict | Fact |
|---|---|---|
| 1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India | Correct | GST replaced excise, service tax, VAT, octroi and others: One Nation, One Tax |
| 2. It will drastically reduce the Current Account Deficit and enable India to increase its foreign exchange reserves | Incorrect | GST is a domestic tax; no direct, drastic effect on the external account |
| 3. It will enormously increase the growth and size of the economy and enable India to overtake China in the near future | Incorrect | A wild overstatement |
Key facts:
| Feature | Detail |
|---|---|
| GST Council | Article 279A; chaired by the Union Finance Minister |
| Components | CGST, SGST, IGST |
| Kept outside | Alcohol for human consumption; petroleum products for now |
Answer: (a) 1 only.
Why each option is right or wrong
- (a) CORRECT. GST replaces multiple taxes and creates a single market in India.
- (b) Incorrect. Neither claim holds; GST does not drastically cut the Current Account Deficit.
- (c) Incorrect. Statement 3 is an exaggeration; GST will not make India overtake China soon.
- (d) Incorrect. Only statement 1 is a likely advantage; the other two are extreme claims.
Key point
GST (1 July 2017, 101st Amendment): destination-based tax replacing multiple indirect taxes; GST Council under Article 279A; creates a single national market.
Remember
GST = many taxes replaced, one market created.
Common mistakes
- Believing that any big reform fixes the Current Account Deficit.
- Ignoring extreme words such as 'drastically' and 'enormously'.
- Thinking GST covers alcohol and petrol; they are outside it.
Exam tip
Statements with 'drastically' or 'enormously' are almost always wrong.
Sources
- Constitution (One Hundred and First Amendment) Act, 2016
- GST Council — About GST