GS Paper III Mains 2019 Question Analysis

  • Enumerate the indirect taxes which have been subsumed in the GST in India. Also, comment on the revenue implications of the GST introduced in India since July 2017.

Mains Assignment Question

Enumerate the indirect taxes which have been subsumed in the GST in India. Also, comment on the revenue implications of the GST introduced in India since July 2017. (150 Words) 

Subjects : Economic-Social Development

Answer Approach :
  • Introduction: Explain the Rationale for introduction of GST and various taxes subsumed under GST.
  • Body: Highlight the revenue implications of GST in terms of Tax rate, Tax base, Tax buoyancy and Tax Compliance.
  • Conclusion: Highlight the need for further streamlining GST.

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Description

The GST has subsumed central and state indirect taxes such as Central Excise Duty, Service Tax, VAT, Entertainment tax, Central Sales Tax, Octroi duty etc. Thus, the GST aims to simplify the taxation regime, remove the cascading effect of tax on tax and improve the tax compliance.

Revenue Implications: The GST has adopted 5 different tax rates leading to complicated indirect tax regime. The revenues of the states have not also grown by 14% year-on-year as guaranteed by the centre leading to higher payment of compensation to the states. Hence, the government must adopt maximum 3 GST rates and increase the GST Compensation Cess.

The increase in the compliance cost and complicated GST forms has not translated into higher tax base. There is a need to adopt technology driven solutions to address this problem.

The GST tax buoyancy has increased by 1.2. However, the present economic slowdown may lead to decrease in tax revenue despite tax buoyancy.

The Tax compliance has been poor on account of complicated forms, delay in refunds, invoice frauds. Some of the government’s measures such as E-Way Bill, simplified returns etc. need to be taken forward. Going forward, the various steps undertaken by the Government is expected to streamline the implementation of the GST leading to higher revenue in long run.

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