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:
Detailed Explanation:
Answer: Option 1 — 1 only
The Goods and Services Tax (GST) is a comprehensive indirect tax reform that replaced multiple central and state taxes, creating a unified national market. This simplifies tax compliance, reduces cascading effects, and promotes ease of doing business across India.
✅ Statement 1 – Correct: GST replaced numerous indirect taxes levied by central and state authorities (like excise duty, VAT, service tax, etc.), creating a single unified market by removing inter-state barriers and simplifying the tax structure.
❌ Statement 2 – Incorrect: GST is a domestic indirect tax reform and has no direct mechanism to reduce Current Account Deficit, which depends on trade balance, foreign investments, remittances, and exchange rate dynamics.
❌ Statement 3 – Incorrect: While GST can contribute to economic efficiency and growth, it alone cannot drastically increase economy size to overtake China, as economic growth depends on multiple complex factors including capital formation, technology, demographics, and global economic conditions.
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