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Q81 (IAS/2017) Economy › Government Finance & Budget › Goods and Services Tax Official Key

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 :

Result
Your answer: —  ·  Correct: A
Explanation

The correct answer is option A (1 only).

GST was introduced on 1 July 2017 with the intention of having a 'One Nation One Tax' system and replaced multiple cascading taxes levied by the Central and State Governments.[1] GST created an un-fragmented unified national market for goods and services with common rules and administration procedures across the nation.[2] Therefore, statement 1 is correct.

Statement 2 is incorrect because GST is a domestic tax reform focused on indirect taxation and market unification. There is no evidence in the sources that GST implementation has drastically reduced India's Current Account Deficit or directly increased foreign exchange reserves. These macroeconomic indicators are influenced by trade balances, capital flows, and external factors rather than domestic tax reforms.

Statement 3 is also incorrect. While GST was expected to result in higher economic growth with GDP expected to rise by about 2%[3], and studies suggested GDP gains within a range of 0.9 to 1.7 per cent[4], these are modest improvements. There is no evidence that GST would "enormously" increase India's economy or enable it to overtake China in the near future—such claims are unrealistic and unsupported.

Sources
  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > GOODS AND SERVICES TAX (GST) > p. 90
  2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > GST Compensation Cess > p. 177
  3. [3] Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 83
  4. [4] https://www.ncaer.org/wp-content/uploads/2022/02/1371816570wp103.pdf
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Q. What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)' ? 1. It will replace multiple taxes collected by mu…
At a glance
Origin: Books + Current Affairs Fairness: Low / Borderline fairness Books / CA: 3.3/10 · 3.3/10
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Statement 1
Did the implementation of the Goods and Services Tax (GST) in India replace multiple indirect taxes that were previously collected by multiple authorities?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > GOODS AND SERVICES TAX (GST) > p. 90
Presence: 5/5
“• With an intention to have a 'One Nation One Tax' system, Goods and Services Tax (GST) as an indirect tax was introduced on 1 July 2017 and is applicable throughout India. It replaced a multiple number of cascading taxes levied by the Central and State Governments. • It was introduced as the Constitution (One Hundred and First Amendment) Act, 2017, following the passage of the 122<sup>nd</sup> Constitutional Amendment Bill.”
Why this source?
  • Explicitly states GST was introduced as 'One Nation One Tax' and replaced a multiple number of cascading taxes levied by Central and State Governments.
  • Directly links replacement of multiple taxes to the GST implementation date (1 July 2017).
Introduction to the Constitution of India, D. D. Basu (26th ed.). > Chapter 25: DISTRIBUTION OF FINANCIAL POWERS > The States, similarly, have their receipts from- > p. 392
Presence: 5/5
“The Constitution (101st Amendment) Act, 2016, has been enacted which has introduced National Goods and Services Tax in India from 1 July 2017. The GST is a comprehensive indirect tax levy on manufacture, sale and consumption of goods as well as services at the national level. It has replaced all indirect taxes levied on goods and services by the Indian Central and State Governments.”
Why this source?
  • States that the 101st Constitutional Amendment introduced National GST from 1 July 2017.
  • Explicitly says GST has replaced all indirect taxes levied on goods and services by Indian Central and State Governments.
Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 82
Presence: 5/5
“Goods and Service Tax (GST) is the single comprehensive indirect tax, operational from 1 July 2017, on supply of goods and services, right from the manufacturer/ service provider to the consumer. It is a destination based consumption tax with facility of Input Tax Credit in the supply chain. It is applicable throughout the country with one rate for one type of goods/service. It has amalgamated a large number of Central and State taxes and cesses. It has replaced large number of taxes on goods and services levied on production/ sale of goods or provision of service.”
Why this source?
  • Describes GST as a single comprehensive indirect tax applicable nationwide.
  • Says GST 'has amalgamated a large number of Central and State taxes' and 'has replaced large number of taxes on goods and services.'
Statement 2
Has the implementation of the Goods and Services Tax (GST) in India created a single national market by harmonizing or unifying tax structures across states and authorities?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > GST Compensation Cess > p. 177
Presence: 5/5
“GST will create an un-fragmented unified national market for goods and services, and will result in friendly tax structure over a common base of goods and services. There will be common rules and administration procedure across the nation. It will widen the tax base and simplify tax procedures bringing in clarity and transparency.”
Why this source?
  • Explicitly asserts GST will create an 'un-fragmented unified national market' and introduce common rules and administration nationwide.
  • States GST will produce a friendly tax structure over a common base and widen the tax base, indicating harmonization across authorities.
Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 83
Presence: 5/5
“Thereafter CGST Act, UTGST Act and SGST Acts were enacted for GST. GST has simplified the multiplicity of taxes on goods and services. The laws, procedures and rates of taxes across the country are standardised. It has facilitated the freedom of movement of goods and services and created a common market in the country. It is aimed at reducing the cost of business operations and cascading effect of various taxes on consumers. It has also reduced the overall cost of production, which will make Indian products/services more competitive in the domestic and international markets. It will also result into higher economic growth as GDP is expected to rise by about 2%.”
Why this source?
  • Says laws, procedures and rates are standardised across the country and that GST 'created a common market'.
  • Links standardisation to facilitation of free movement of goods/services and reduced cascading—core features of a unified market.
Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 82
Presence: 5/5
“Goods and Service Tax (GST) is the single comprehensive indirect tax, operational from 1 July 2017, on supply of goods and services, right from the manufacturer/ service provider to the consumer. It is a destination based consumption tax with facility of Input Tax Credit in the supply chain. It is applicable throughout the country with one rate for one type of goods/service. It has amalgamated a large number of Central and State taxes and cesses. It has replaced large number of taxes on goods and services levied on production/ sale of goods or provision of service.”
Why this source?
  • Describes GST as a single comprehensive indirect tax operational nationwide that amalgamated many Central and State taxes.
  • Notes one rate for one type of goods/service and replacement of many earlier taxes — direct evidence of unification/harmonization.
Statement analysis

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Statement 3
Has the implementation of GST in India drastically reduced India's Current Account Deficit?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 5/5
"**India has been running a current account deficit almost uninterruptedly since 2000.** The current account deficit temporarily increased during 2022, to 2.4% of GDP from 1% in 2021, due to the energy price shock worsening India’s terms of trade. It has since come down to around 1% in 2023 and 2024-H1."
Why this source?
  • Directly reports that India has run a current account deficit almost uninterruptedly since 2000, indicating persistence of the deficit after GST implementation.
  • Notes the CAD rose to 2.4% in 2022 due to an energy shock and then fell to around 1% in 2023 and 2024-H1 — changes attributed to terms-of-trade/energy prices, not to GST.
Web source
Presence: 3/5
"In sum, implementation of a comprehensive GST in India is expected to lead to efficient allocation of factors of production thus leading to gains in GDP and exports."
Why this source?
  • Presents an analytical expectation that comprehensive GST could lead to gains in GDP and exports, which might affect trade balances in theory.
  • This is a projection of potential export gains under GST, not observed post-implementation evidence that GST has drastically reduced the CAD.

Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 83
Strength: 5/5
“Thereafter CGST Act, UTGST Act and SGST Acts were enacted for GST. GST has simplified the multiplicity of taxes on goods and services. The laws, procedures and rates of taxes across the country are standardised. It has facilitated the freedom of movement of goods and services and created a common market in the country. It is aimed at reducing the cost of business operations and cascading effect of various taxes on consumers. It has also reduced the overall cost of production, which will make Indian products/services more competitive in the domestic and international markets. It will also result into higher economic growth as GDP is expected to rise by about 2%.”
Why relevant

Says GST reduces overall cost of production and makes Indian goods/services more competitive, and may raise GDP (~2%).

How to extend

A student could infer that greater competitiveness could boost exports and/or reduce import demand, which—if large enough—would improve the trade balance and hence the CAD; check export/import time-series after GST.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > For business and industry > p. 177
Strength: 4/5
“• Easy compliance: A robust and comprehensive IT system is the foundation of GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. are available to the taxpayers online which makes compliance easy and transparent. Under pre-GST regime, separate returns had to be filed for VAT to States and for Central Excise to Centre but now under GST only one return need to be filed.• Uniformity of tax rates and structures: GST has ensured that indirect tax rates and structures are common across the country, thereby reducing compliance cost and increasing certainty and ease of doing business.”
Why relevant

States GST brings uniform tax rates and easier compliance, reducing compliance costs and uncertainty for businesses.

How to extend

Lower compliance and transaction costs might increase domestic production and export supply; a student could compare export growth rates and manufacturing competitiveness before vs after GST.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Challenges: > p. 179
Strength: 4/5
“For example, keeping electricity out of GST undermines the competitiveness of Indian industry because taxes on power get embedded in manufacturer's costs and cannot be claimed back as input tax credits.• India's current GST regime goes against one of the more basic principles of increasing revenue: the lower the rate of taxation, the greater number of people and businesses that will comply. In other words, if the ideal taxation regime is the one that taxes more items at lesser rates, our new GST regime is far from that.• Another closely connected issue is the GST threshold limit, which exempts businesses from registration for GST that has turnover of under 40 lakhs per year.”
Why relevant

Points out exclusions (e.g., electricity) and high rates/thresholds that can embed tax in costs and limit GST's revenue/competitiveness benefits.

How to extend

This suggests GST's positive effect on trade could be partial; a student could examine sectors where input taxes remain embedded (power-intensive industries) to see if those sectors' trade performance changed post-GST.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > Balance of Current Account = Balance of Visible + Balance of Invisible > p. 473
Strength: 5/5
“Balance of Current Account = Balance of Visibles + Balance of Invisibles Particular | 2019 - 20 | 2020-21 (Apr-Sep) • Col1: Balance of Trade (A); Present Status of CAD in India: -1,57,506; (in US$ Million): -25,552 • Col1: Balance of Invisibles (B); Present Status of CAD in India: +132,850; (in US$ Million): +60,270 • Col1: Current Account Balance (A + B); Present Status of CAD in India: -24,656; (in US$ Million): +34,718 • Col1: Current Account Deficit (as a % of GDP); Present Status of CAD in India: -1.9%; (in US$ Million): +3.1\% (H1)”
Why relevant

Provides the decomposition: Current Account = balance of visibles (trade) + invisibles (services), showing CAD arises from trade/invisibles dynamics.

How to extend

Use this to identify the channels (exports/imports of goods and services) through which GST-induced cost/competitiveness changes would have to operate to affect the CAD; then check those components empirically post-GST.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 4. What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)?' > p. 126
Strength: 3/5
“4. 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. 2017 • 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: (b) 2 and 3 only (a) 1 only (c) 1 and 3 only (d) 1, 2 and 3”
Why relevant

Contains an exam-style claim that GST 'will drastically reduce the Current Account Deficit'—this shows the hypothesis exists in textbooks as a potential advantage.

How to extend

Treat this as a stated hypothesis to be tested: a student could treat it as a claim and seek time-series CAD data around GST implementation to confirm or refute it.

Statement analysis

This statement analysis shows book citations, web sources and indirect clues. The first statement (S1) is open for preview.

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Statement 4
Has the implementation of GST in India led to a significant increase in India's foreign exchange reserves?
Origin: Weak / unclear Fairness: Borderline / guessy
Indirect textbook clues
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Government Budgeting > p. 188
Strength: 4/5
“What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)'? [2017] • (i) It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.• (ii) It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves.• (iii) 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: • (a) (i) only• (b) (ii) & (iii) only• (c) (i) & (iii) only• (d) (i), (ii) & (iii)• 13.”
Why relevant

This exam-style snippet lists as a purported advantage of GST that it 'will drastically reduce the Current Account Deficit and will enable it to increase its foreign exchange reserves' — giving a hypothesised causal link between a domestic tax reform and reserves.

How to extend

A student could test this by checking whether CAD narrowed and net exports or export competitiveness improved after GST's 2017 rollout, and whether timing matches reserve increases.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 17: India’s Foreign Exchange and Foreign Trade > STERILISATION AS A POLICY TOOL OF RBI > p. 498
Strength: 5/5
“RBI has intervened excessively in recent years to prevent the rupee from appreciating too fast. This has helped to bring in more Dollars into the Indian economy. Moreover, with the help of sluggish imports and capital controls in recent years, we find a continuous rise in India's forex reserves. RBI has mainly intervened through the policy of sterilisation. Under sterilisation, RBI purchases Dollars from the market and releases Indian rupee in return, and then again sucks the excessive rupee from the economy through sale of Government Securities (G-Secs). This process of sterilisation has been the RBI's important exchange rate management tool in recent years.”
Why relevant

Explains a concrete mechanism (RBI sterilisation and dollar purchases, aided by sluggish imports and capital controls) that has contributed to recent rises in forex reserves.

How to extend

Compare the timing and magnitude of RBI interventions, import trends and capital controls around 2017+ to see if reserves rose due to these factors rather than GST.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 17: India’s Foreign Exchange and Foreign Trade > RESERVE ADEQUACY FEW MONTHS OF IMPORTS RULE VERSUS GUIDOTTI-GREENSPAN RULE > p. 497
Strength: 4/5
“Conventional rule of reserve cover of imports is 3 months. Thus, India is in a better position. • Year: India's Forex Reserves; 1991-92: $5.8 billion; End of March 2018: $407 billion; End of June 2020: $505.7 billion • India ranks among the top 10 countries in terms of forex reserves, the first being China. • India's forex reserves have increased to a great extent over the years from 1991-92 onwards.”
Why relevant

Provides a long-run series and specific levels showing reserves rose substantially from $5.8bn (1991–92) to $407bn (Mar 2018) and $505.7bn (June 2020), illustrating that reserves have been rising over decades.

How to extend

A student can map these yearly/reserve datapoints against the 2017 GST introduction to see whether a distinct inflection in the trend coincides with GST.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 16: Balance of Payments > FOREIGN EXCHANGE RESERVES > p. 483
Strength: 4/5
“Balance of Payments 16.15 • India's forex reserves stand at US$ 583.94 billion as on 5 February 2021 (based on RBI \sigmareport). • India's foreign exchange reserves include: ö • FCAs (Foreign Currency Assets) 1. 2. Monetary gold 3. SDRs (Special Drawing Rights) (SDRs are held in the custody of the government instead of RBI) 4. RTP (Reserve Tranche Position) in the International Monetary Fund (IMF). • At present, FCAs have the maximum share (>90%) in the forex reserves of RBI, followed by gold. Reserve Tranche - It is a portion of the required quota of currency that each member country must provide to the IMF which can be utilised for its own purposes.”
Why relevant

Gives a specific reserve level (US$ 583.94bn as on 5 Feb 2021) and describes reserve composition (FCAs, gold, SDRs), which shows what is being measured when claiming 'increase in reserves.'

How to extend

Use these published reserve totals and composition before and after 2017 to determine if the increase is substantial and whether components suggest causes (e.g., capital inflows vs valuation effects).

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 4. Management of Foreign Exchange Reserves > p. 68
Strength: 3/5
“The foreign exchange reserves include foreign currency assets (FCA), Special Drawing Rights (SDRs) and gold. The RBI, as the custodian of the country's foreign exchange reserves, is vested with the responsibility of managing their investment. The legal provisions governing management of foreign exchange reserves are laid down in the RBI Act 1934. The RBI Act permits the RBI to invest these reserves in the following types of instruments: • Deposits with Bank for International Settlement and other central banks• Deposits with foreign commercial banks• Debt instruments representing sovereign or sovereign guaranteed liability• Other instruments as approved by the Central Board of the RBI The basic parameters of the RBI's policies for foreign exchange reserves management are safety, liquidity and returns.”
Why relevant

Describes legal/investment instruments and RBI's role in managing reserves, highlighting that reserves change via foreign asset transactions and valuation/portfolio effects.

How to extend

Investigate RBI balance-sheet operations (purchases/sales, asset valuation) post-GST to judge if reserve changes were managerial/market-driven rather than caused by GST altering trade flows.

Statement analysis

This statement analysis shows book citations, web sources and indirect clues. The first statement (S1) is open for preview.

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Statement 5
Has the implementation of GST in India enormously increased the growth rate and size of the Indian economy?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 4/5
"These accomplishments reflect the successful implementation and growing compliance under the GST regime, contributing significantly to India's economic growth and stability."
Why this source?
  • Explicitly states GST has contributed significantly to India's economic growth and stability.
  • Describes GST as simplifying compliance and reducing tax cascading, mechanisms that can increase economic efficiency and size.
Web source
Presence: 5/5
"rate gains vary between 0.68 and 1.33 per cent. The real returns to capital would gain somewhere between 0.37 and 0.74 per cent."
Why this source?
  • Provides quantitative estimates of growth-rate gains from GST (0.68–1.33%), giving a measured effect on growth.
  • Notes improvements in returns to capital and factor allocation, indicating efficiency and size effects in the economy.
Web source
Presence: 3/5
"The implementation of Goods and Services Tax (GST) in India has been variously described as “one country-one tax ”, “a game changer ” and “a reform of the century ”."
Why this source?
  • Describes GST as 'a game changer' and 'a reform of the century,' language that implies a large/transformative impact.
  • Frames the implementation as a remarkable achievement for a large federal country, supporting claims of substantial effect.

Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 83
Strength: 5/5
“Thereafter CGST Act, UTGST Act and SGST Acts were enacted for GST. GST has simplified the multiplicity of taxes on goods and services. The laws, procedures and rates of taxes across the country are standardised. It has facilitated the freedom of movement of goods and services and created a common market in the country. It is aimed at reducing the cost of business operations and cascading effect of various taxes on consumers. It has also reduced the overall cost of production, which will make Indian products/services more competitive in the domestic and international markets. It will also result into higher economic growth as GDP is expected to rise by about 2%.”
Why relevant

NCERT states GST standardised taxes, reduced production costs and says GDP is expected to rise by about 2% — an explicit textbook estimate of GST's macro effect.

How to extend

A student could compare the textbook's +2% expectation with actual GDP growth rates for years before and after GST to judge whether GST produced an 'enormous' increase.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > For Central and State Governments > p. 178
Strength: 4/5
“Previously invoice matching existed only for intra-state VAT transactions and not for excise and service taxes nor for imports. GST has resulted in better tax compliance through a robust IT infrastructure. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that has incentivized tax compliance by traders.• Increase in tax base: As a lot of new agents, who were previously outside the tax net have sought GST registration, it has resulted in increasing in the tax base and tax buoyancy.• Higher revenue efficiency: GST has decreased the cost of collection of tax revenues of the Government, and has led to higher revenue efficiency.”
Why relevant

Describes mechanisms: GST increased tax base, improved compliance, seamless input tax credit and higher revenue efficiency — channels through which GST can raise government revenue and potentially GDP.

How to extend

One could use these channels to check whether rising revenues or investment-friendly effects after GST correlate with higher GDP growth in national accounts.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > For business and industry > p. 177
Strength: 4/5
“• Easy compliance: A robust and comprehensive IT system is the foundation of GST regime in India. Therefore, all tax payer services such as registrations, returns, payments, etc. are available to the taxpayers online which makes compliance easy and transparent. Under pre-GST regime, separate returns had to be filed for VAT to States and for Central Excise to Centre but now under GST only one return need to be filed.• Uniformity of tax rates and structures: GST has ensured that indirect tax rates and structures are common across the country, thereby reducing compliance cost and increasing certainty and ease of doing business.”
Why relevant

Notes reduced compliance costs and uniform tax rates across India, which lower cost of doing business — a microeconomic pathway to higher investment and output.

How to extend

Combine this with firm-level or sectoral output/investment data (pre- and post-GST) to test whether reduced compliance translated into higher production and growth.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > GST Compensation Cess > p. 176
Strength: 3/5
“When Central government was planning to introduce GST, States were worried that after the implementation of GST, tax revenue of States may fall and they will not have the freedom under GST regime to impose extra taxes. So, Government of India calculated the tax revenue growth of State's indirect taxes from 2012-13 to 2013-14, 2013-14 to 2014-15 and 2014-15 to 2015-16 i.e. for three years and it found an average annual growth of 14%. So, Govt. of India promised States that if after implementation of GST, the States Indirect Revenue growth is less than 14% annually from 2015-16 (base”
Why relevant

Government used a 14% average annual growth of states' indirect tax collections (2012–2016) as a baseline for GST compensation — showing expectations about revenue continuity and growth trajectories.

How to extend

A student could compare actual state indirect tax collections and overall fiscal balances after GST against that 14% baseline to assess revenue and growth impacts.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 4. What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)?' > p. 126
Strength: 3/5
“4. 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. 2017 • 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: (b) 2 and 3 only (a) 1 only (c) 1 and 3 only (d) 1, 2 and 3”
Why relevant

Textbook exercise lists 'enormously increase the growth and size of economy' as a claimed advantage of GST (presented as an assertion to evaluate) — indicating this is a hypothesised outcome taught for scrutiny.

How to extend

Treat this as a hypothesis prompting empirical checks — e.g., compare GDP growth trends, investment rates, and competitiveness indicators before and after GST implementation.

Statement analysis

This statement analysis shows book citations, web sources and indirect clues. The first statement (S1) is open for preview.

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Statement 6
Is the Goods and Services Tax (GST) in India expected to enable India to overtake China economically in the near future?
Origin: Weak / unclear Fairness: Borderline / guessy
Indirect textbook clues
Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 82
Strength: 4/5
“Goods and Service Tax (GST) is the single comprehensive indirect tax, operational from 1 July 2017, on supply of goods and services, right from the manufacturer/ service provider to the consumer. It is a destination based consumption tax with facility of Input Tax Credit in the supply chain. It is applicable throughout the country with one rate for one type of goods/service. It has amalgamated a large number of Central and State taxes and cesses. It has replaced large number of taxes on goods and services levied on production/ sale of goods or provision of service.”
Why relevant

Defines GST as a single, destination-based consumption tax that amalgamated many central/state taxes and applies uniformly, implying removal of previous tax fragmentation.

How to extend

A student could combine this with basic facts about how unified markets and lower compliance costs affect investment and growth to judge whether such structural reform could close large international GDP gaps.

Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 83
Strength: 5/5
“Thereafter CGST Act, UTGST Act and SGST Acts were enacted for GST. GST has simplified the multiplicity of taxes on goods and services. The laws, procedures and rates of taxes across the country are standardised. It has facilitated the freedom of movement of goods and services and created a common market in the country. It is aimed at reducing the cost of business operations and cascading effect of various taxes on consumers. It has also reduced the overall cost of production, which will make Indian products/services more competitive in the domestic and international markets. It will also result into higher economic growth as GDP is expected to rise by about 2%.”
Why relevant

States GST simplifies taxes, reduces cost of business and production, and notes an expected GDP rise of about 2% as a result.

How to extend

Compare an estimated ~2% GDP uplift to the current India–China GDP gap (from external world GDP data) to assess whether GST-sized gains could be decisive in the near term.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Goods and Services Tax (GST): > p. 174
Strength: 4/5
“So now, when a product or service will be sold to the consumer across India, only one indirect tax will be imposed i.e. GST, which consists of Central GST (CGST) and States GST (SGST). And if a product is sold across State then Integrated GST (IGST) will be levied by the Centre. GST is basically a value added tax imposed only in case of value addition. To introduce the Goods and Services tax (GST), the Constitution (101) Amendment Act 2016 was passed in September 2016. As per the Act, the Central Government has enacted Central GST (CGST) Act and every State Government has enacted State GST (SGST) Act in their respective States.”
Why relevant

Explains GST is a value-added tax with CGST/SGST/IGST structure and standardised laws, indicating administrative uniformity and clearer tax credits across states.

How to extend

A student could infer how reduced cascading taxes and clearer input tax credit could improve manufacturing competitiveness and exports, then check if such competitiveness gains scale enough to overtake China.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > GST Compensation Cess > p. 177
Strength: 3/5
“GST will create an un-fragmented unified national market for goods and services, and will result in friendly tax structure over a common base of goods and services. There will be common rules and administration procedure across the nation. It will widen the tax base and simplify tax procedures bringing in clarity and transparency.”
Why relevant

Claims GST will create an un-fragmented national market, widen the tax base and simplify procedures, suggesting potential for higher formalisation and tax revenues.

How to extend

Use this to reason that higher revenues and a unified market may support public investment and productivity growth; then compare likely magnitudes to the India–China economic gap using public data.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 4. What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)?' > p. 126
Strength: 2/5
“4. 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. 2017 • 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: (b) 2 and 3 only (a) 1 only (c) 1 and 3 only (d) 1, 2 and 3”
Why relevant

Contains a textbook multiple-choice suggestion (as an option) that GST will 'enormously increase' India's growth and 'enable it to overtake China', illustrating that some sources present this as a claimed possible effect (but not proven).

How to extend

Treat this as an example of an asserted extreme outcome; a student could test plausibility by estimating how large growth increases would need to be to overtake China and whether GST-related mechanisms could plausibly deliver that magnitude.

Statement analysis

This statement analysis shows book citations, web sources and indirect clues. The first statement (S1) is open for preview.

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Pattern takeaway: UPSC consistently traps students with 'Magical Thinking' options. Any statement claiming a single policy will 'drastically' fix complex structural issues (like CAD) or geopolitical gaps (China) is 99% false.
How you should have studied
  1. [THE VERDICT]: Sitter. Solvable purely by eliminating extreme adjectives ('drastically', 'enormously'). Source: NCERT Macroeconomics Box 5.3.
  2. [THE CONCEPTUAL TRIGGER]: Indirect Tax Reforms & Fiscal Federalism (GST Architecture).
  3. [THE HORIZONTAL EXPANSION]: Memorize GST Council structure (Art 279A, Centre 1/3 vote, States 2/3 vote, 3/4 majority needed); Exclusions (Alcohol for human consumption, 5 Petroleum products); Composition Scheme limit (₹1.5 Cr turnover); e-Way Bill threshold (>₹50k).
  4. [THE STRATEGIC METACOGNITION]: When studying government schemes/reforms, distinguish between the 'Objective' (Single Market) and the 'Speculative Outcome' (Overtaking China). UPSC accepts the former but rejects the latter as hyperbole.
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Concept hooks from this question
📌 Adjacent topic to master
S1
👉 One Nation One Tax — subsuming Central and State indirect taxes
💡 The insight

The core claim is that GST replaced multiple indirect taxes collected by different authorities; several references state GST subsumed Central and State taxes into a single tax.

High-yield for GS prelims and mains: explains the structural reform aim of GST and its federal implications. Connects to fiscal federalism, tax administration and inter-governmental revenue flows. Useful for questions on tax reform rationale, benefits like single market creation, and challenges in Centre‑State fiscal relations.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > GOODS AND SERVICES TAX (GST) > p. 90
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > For Central and State Governments > p. 178
🔗 Anchor: "Did the implementation of the Goods and Services Tax (GST) in India replace mult..."
📌 Adjacent topic to master
S1
👉 Constitutional basis — the 101st Amendment enabling GST
💡 The insight

The enactment of GST required a constitutional amendment that moved taxing powers to enable a national indirect tax replacing earlier levies.

Important for polity and governance questions: links constitutional amendment process to economic reform. Helps answer questions on the legal/constitutional mechanism for creating GST and Centre‑State jurisdiction over taxation. Master by mapping amendment to changes in financial powers and subsequent state Acts.

📚 Reading List :
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > GOODS AND SERVICES TAX (GST) > p. 90
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Goods and Services Tax (GST): > p. 174
🔗 Anchor: "Did the implementation of the Goods and Services Tax (GST) in India replace mult..."
📌 Adjacent topic to master
S1
👉 GST features: amalgamation, destination-based tax and removal of cascading
💡 The insight

References mention GST amalgamated many taxes, is destination‑based, and addresses cascading by input tax credit — all explain how multiple taxes were replaced in practice.

Practically useful for answering 'how' GST changed tax incidence and trade costs. Links to topics on tax efficiency, input tax credit mechanism, and implications for trade within India. High-yield for explaining economic rationale and administrative impact of GST.

📚 Reading List :
  • Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 82
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Details about GST > p. 91
🔗 Anchor: "Did the implementation of the Goods and Services Tax (GST) in India replace mult..."
📌 Adjacent topic to master
S2
👉 One Nation, One Tax → One Market
💡 The insight

Multiple references claim GST replaced many taxes and aimed at a single, unified market across India.

High-yield for UPSC: this captures the policy rationale behind GST and often appears in economy/IR questions. Understanding it helps answer linkage questions on national integration of markets, federal fiscal reforms, and impacts on trade and growth. Master via comparison of pre- and post-GST tax fragmentation and its intended outcomes.

📚 Reading List :
  • Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 82
  • Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 83
🔗 Anchor: "Has the implementation of the Goods and Services Tax (GST) in India created a si..."
📌 Adjacent topic to master
S2
👉 GST tax architecture: CGST, SGST, IGST & destination-based tax
💡 The insight

References describe the tri-part GST structure and that inter-state supplies attract IGST—showing the mechanism used to harmonise taxation across states.

Important for UPSC: explains how GST preserves federal roles while creating common rules; useful for questions on centre-state fiscal relations, tax incidence and supply-chain taxation. Learn the roles of CGST/SGST/IGST and destination-based principle for application-type questions.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Goods and Services Tax (GST): > p. 174
  • Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > Details about GST > p. 91
🔗 Anchor: "Has the implementation of the Goods and Services Tax (GST) in India created a si..."
📌 Adjacent topic to master
S2
👉 Constitutional amendment & GST Council — centre-state coordination
💡 The insight

Evidence notes the 101st Amendment enabled GST and the GST Council was created to coordinate rates and administration between centre and states.

Crucial for UPSC: links constitutional change with institutional design in fiscal federalism. Questions often probe legality, governance and cooperative federalism; understanding the amendment and the Council clarifies decision-making and dispute-resolution mechanisms. Study the amendment's effect and the Council's composition/powers.

📚 Reading List :
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Goods and Services Tax (GST): > p. 174
  • Indian Polity, M. Laxmikanth(7th ed.) > Chapter 47: Goods and Services Tax Council > ESTABLISHMENT > p. 434
🔗 Anchor: "Has the implementation of the Goods and Services Tax (GST) in India created a si..."
📌 Adjacent topic to master
S3
👉 How GST affects production costs and competitiveness
💡 The insight

References state GST standardises taxes, reduces cascading effects and overall cost of production, which can influence export competitiveness — a channel through which GST could affect the current account.

High-yield for UPSC: links fiscal policy (indirect taxation) to external sector outcomes (exports/imports). Useful for questions on reforms → supply-side competitiveness → trade performance. Master by mapping transmission channels: tax simplification → lower production costs → export competitiveness → potential CAD impact, and note moderating factors.

📚 Reading List :
  • Macroeconomics (NCERT class XII 2025 ed.) > Chapter 5: Government Budget and the Economy > Box 5.3: GST: One Nation, One Tax, One Market > p. 83
  • Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > For business and industry > p. 177
🔗 Anchor: "Has the implementation of GST in India drastically reduced India's Current Accou..."
Micro-concepts

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🌑 The Hidden Trap

The GST Council's voting math is the next logical trap. Remember: The Centre has 1/3rd voting power, States have 2/3rd. A decision requires a 3/4th majority. This means neither the Centre nor the States can pass a decision unilaterally—a 'Shadow Fact' often swapped in options.

⚡ Elimination Cheat Code

Apply the 'Adjective Filter'. Words like 'Drastically' (St 2) and 'Enormously' (St 3) are red flags in Economy questions. Economic reforms have incremental, lagged effects, not instant magical ones. If an option sounds like a political campaign speech ('Overtake China'), eliminate it.

🔗 Mains Connection

Connect GST to 'Fiscal Federalism' in GS-2 Mains. While GST created a 'Single Market' (Economic Integration), it arguably reduced the 'Fiscal Autonomy' of states (Political Centralization), leading to tensions over Compensation Cess.

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SIMILAR QUESTIONS

CDS-II · 2021 · Q71 Relevance score: -0.48

Following the Constitution (One Hundred and First Amendment) Act, 2016, the Parliament of India enacted ite a few GST Acts in the year 2017. Which one of the following does not fall in this category ?

CDS-I · 2025 · Q81 Relevance score: -1.08

Which of the following Constitution Amendment Acts introduced GST (Goods and Services Tax) in course of inter-state trade or commerce ?