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Which of the following is/are correct about Goods and Service Tax (G.S.T)?

a) It was proposed by the Kelkar task force which was constituted on F.R.B.M Act in July 2004.

b) It came into effect in June 2017.

c) The 101st amendment to the constitution provided for the constitution of the G.S.T council comprising the Union Finance Minister as Chairman.


1. a and b only
2. c only
3. a and c only
4. a,b and c only

1 Answer

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Correct Answer - Option 3 : a and c only

The correct answer is a and c only.

  • Why GST?
    • A common argument in popular discussions is what is the need for the introduction of GST?
      • To answer that question, it is important to understand the present indirect tax structure in our country.
      • The Central Government levies tax on
        • Manufacture (Central Excise duty),
        • Provision of services (Service Tax),
        • Interstate sale of goods. 
      • The State Governments levy tax on
        • Retail sales (Value Added Tax),
        • the Entry of goods in the State (Entry Tax),
        • Luxury Tax,
        • Purchase Tax.
    • It is clearly visible that there are multiplicities of taxes that are being levied on the same supply chain.
    • There is a cascading effect of taxes. A cascading tax is imposed repeatedly at each stage of a product's journey along the supply chain.
    • Further, a variety of VAT laws in the country with disparate tax rates and dissimilar tax practices divides the country into separate economic spheres.
    • The Creation of tariff and non-tariff barriers such as Octroi, entry Tax, Check posts, etc. hinder the free flow of trade throughout the country.
    • Besides that, a large number of taxes creates high compliance costs for the taxpayers in the form of a number of returns, payments, etc.
  • What is GST?
    • All the taxes mentioned earlier are proposed to be subsumed in a single tax called the Goods and Services Tax (GST) which will be levied on the supply of goods or services or both at each stage of the supply chain starting from manufacture or import and till the last retail level.
    • So basically any tax that is presently being levied by the Central or State Government on the supply of goods or services is going to be converged into GST.
    • GST is proposed to be a dual levy where the Central Government will levy and collect Central GST (CGST) and the State will levy and collect State GST (SGST) on intra-state supply of goods or services.
    • The Centre will also levy and collect Integrated GST (IGST) on inter-state supply of goods or services.
    • Thus GST is a unifier that is going to integrate various taxes being levied by the Centre and the State at present and provide a platform for forging an economic union of the country.

  • In 2002, the Vajpayee government had formed a task force under Vijay Kelkar to recommend tax reforms. In 2004, it recommended to roll out GST. 
  • The tax came into effect from 1 July 2017 through the implementation of the One Hundred and First Amendment of the Constitution of India by the Indian government. (Asked in MPSC)

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