UPSC Prelims 2017 · Question 31 of 99
UPSC Prelims 2017 question on GST Advantages
- ExamUPSC CSE
- Year2017
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicTaxation
- DifficultyMedium
- TypeStatement
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.
Select the correct answer using the code given below:
Show answer
Answer: A. 1 only
Verdict
The answer is 1 only. GST replaces multiple taxes and creates a single market, but the claims about the current account deficit and overtaking China are not its advantages.
Analysis
Statement 1 is CORRECT. GST is one indirect tax for the whole country, subsuming a range of central and state levies and removing interstate tax barriers, which is what creates a unified common market. Statement 2 is INCORRECT. The current account deficit is driven by the balance of trade and invisibles, and a domestic indirect tax reform does not drastically reduce it. Statement 3 is INCORRECT. No credible claim ties GST to a growth surge sufficient to overtake China, and the assertion is speculative rather than an advantage of the tax.
Source
Official GST material.
How to crack it
Grade each statement by the strength of its claim, because statements 2 and 3 both use extreme language, drastically reduce and enormously increase, and both promise effects far removed from the instrument. A tax reform acts first on tax administration and market integration, and only distantly on growth or the external account. Ranking claimed effects by how many causal steps separate them from the instrument disposes of both distractors.