Current set IAS · 2017 Q81

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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] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > GOODS AND SERVICES TAX (GST) > p. 90
[2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > GST Compensation Cess > p. 177
[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] https://www.ncaer.org/wp-content/uploads/2022/02/1371816570wp103.pdf

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PROVENANCE & STUDY PATTERN

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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.

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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This is a classic 'Logic vs. Hype' question. Statement 1 is the textbook definition of GST found in NCERT. Statements 2 and 3 are extreme exaggerations ('drastically', 'enormously', 'overtake China'). The strategy is to trust the structural definition but reject the magical outcomes.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

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?
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?
Statement 3: Has the implementation of GST in India drastically reduced India's Current Account Deficit?
Statement 4: Has the implementation of GST in India led to a significant increase in India's foreign exchange reserves?
Statement 5: Has the implementation of GST in India enormously increased the growth rate and size of the Indian economy?
Statement 6: Is the Goods and Services Tax (GST) in India expected to enable India to overtake China economically in the near future?

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 analysis