Q10. Discuss the rationale for introducing Goods and services tax in India. Bring out critically the reasons for delay in roll out for its regime. 

Model Answer:

Introduction

The Goods and Services Tax (GST) was introduced in India to simplify the tax structure, enhance compliance, and promote economic growth by creating a unified national market.

Body

Rationale for GST Introduction

1. Simplification of Tax Structure: GST replaced multiple indirect taxes, reducing complexity and compliance burdens on businesses. This streamlined tax system aimed to unify the country’s fragmented market.
2. Increase in Revenue: By broadening the tax base, GST sought to increase government revenue through better compliance and reduced tax evasion. A unified tax structure aimed to enhance overall economic growth.
3. Encouragement of Trade: GST facilitated the seamless movement of goods across state borders by eliminating the cascading effect of taxes, thus promoting inter-state trade and investment.
4. Technological Advancements: GST implementation involved digitization of tax processes, improving transparency and efficiency in tax collection, and making it easier for businesses to file returns.
5. Boost to Small Businesses: The introduction of a composition scheme aimed to benefit small businesses by simplifying their tax obligations and reducing compliance costs.

Reasons for Delay in GST Rollout

1. Political Consensus: Reaching a consensus among central and state governments proved challenging, leading to protracted negotiations over the GST framework and rates.
2. Complexity in Implementation: The need for a robust IT infrastructure and widespread training for taxpayers and officials delayed the system's rollout, given India's vast and diverse economic landscape.
3. Concerns from Stakeholders: Various stakeholders, including small traders and businesses, expressed concerns about the potential impact of GST on their operations, leading to calls for adjustments and clarifications.
4. Economic Conditions: Fluctuations in economic performance and concerns over inflation also contributed to hesitance regarding the timing of GST implementation.
5. Resistance from States: Some states were apprehensive about revenue loss due to the proposed GST structure, leading to demands for compensatory measures, further delaying consensus.

Conclusion

The introduction of GST aimed to simplify the tax landscape and enhance economic growth, but delays were due to political, technical, and economic challenges, highlighting the complexity of federal tax reforms.  

‍

Instant Mains Evaluation with SuperKalam

‍