Q1. Enumerate the indirect taxes which have been subsumed in the goods and services tax (GST) in India. Also, comment on the revenue implications of the GST introduced in India since July 2017.  

Model Answer:

Introduction

The Goods and Services Tax (GST) in India, implemented on July 1, 2017, subsumed several indirect taxes at both central and state levels. 

Body

These taxes include:

  • Central taxes: Central Excise Duty, Service Tax, Additional Excise Duties, Additional Customs Duty (Countervailing Duty), Special Additional Duty of Customs and Central Surcharges and Cesses on goods and services
  • State taxes: State VAT/Sales Tax,  Luxury Tax, Entry Tax (all forms), Entertainment Tax (except levied by local bodies), Taxes on advertisements and State surcharges and cesses related to goods and services​

Revenue Implications of GST: The introduction of GST has had notable revenue implications:

On Union 

  1. Input Tax Credit and Self-Policing: GST provides input tax credit, theoretically encouraging self-policing among merchants, but this hasn't materialized effectively.
  2. Increased Tax Base and Compliance: The tax base expanded significantly, with businesses registered under GST rising from 6.4 million under the previous regime to over 11 million post-GST.   
  3. Boost to Formal Economy: GST formalized previously unregistered businesses, particularly in the informal sector, contributing to higher tax revenue and improved competition​. 

On State Revenue

  1. Destination-Based Tax and Source States: GST's destination-based structure has led to manufacturing source states suffering revenue losses.
  2. States with Revenue Decline: States like Punjab, Himachal Pradesh, Chhattisgarh, Uttarakhand, J&K, Odisha, Goa, Bihar, Gujarat, and Delhi witnessed SGST revenue declines.
  3. States with Revenue Growth: States such as Andhra Pradesh and some Northeastern states (Mizoram, Manipur, Sikkim, Nagaland) saw revenue increases. 

Conclusion

In conclusion, GST has streamlined India’s tax system by eliminating cascading taxes and enhancing compliance, although challenges like state revenue shortfalls remain. It continues to evolve, aiming to strengthen India’s fiscal structure.

‍

Instant Mains Evaluation with SuperKalam

✅ Now that you have gone through the model answer, try practicing and writing it in your own words and evaluate it instantly with SuperKalam here - Evaluate Mains Answer instantly

‍

Read more blogs