GST
Descriptive Answer Writing
Practice Questions
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Q.1) How GST is better than previous indirect taxes? [10]
Ans.
GST is said to be one of the most important Indirect Tax Reforms in India’s history. Goods and
Service Tax (GST) is an indirect tax levied on the supply of goods and services in India right from the
manufacturer to the consumer. It is a single unified tax created by amalgamating a large number of
Central and State taxes presently applicable in India. It is levied at every step in the production
process but refunded to all parties in the various stages of production other than the final consumer
GST is better than previous indirect taxes due to the following benefits that it offers to the
government as well as the tax payers.
For government:
In the earlier Indirect Tax regime, there were many indirect taxes (like VAT, CST, Service tax,
CAD, SAD, and Excise) levied by both state and centre but GST brings all the indirect taxes on
one platform.
GST is a destination-based tax i.e. tax is imposed at the point of consumption but previous
tax structure was origin based.
GST also helps in better tax collections as it streamlines the tax administration, avoid
harassment of the business and result in higher revenue collection, both for the Centre and
the States.
This law has replaced many indirect tax laws that previously existed in India. It integrates the
country through a uniform tax rate thus help in boosting the Indian economy.
GST will also make Indian products competitive in the domestic and international markets.
For tax payers:
It is more transparent as it is designed in such way that all tax payer services such as
registrations, returns, payments, etc. would be available to the taxpayers online, which
would make compliance easy and transparent.
It reduces harassment and corruption.
GST avoids cascading effect (tax on tax) as the tax is calculated only on the value add at each
stage of transfer of ownership.
This has been beneficial for start-ups especially, as they do not have to run from pillar to
post to get different registrations such as VAT, excise, and service tax.
It leads in reduction of manufacturing costs due to lower burden of taxes on the
manufacturing sector. Hence prices of consumer goods will be likely to come down followed
by lower burden on the common man.
Government implemented it and continues to amend it from time to time to better regulate and
organize certain industries, improve efficiency of logistics, ensure better economic growth, bring
transparency in the taxation system by reducing the complexities of the tax system thereby helping
to integrate the whole nation with common taxation and getting rid issues of tax cascading and
double taxation .
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