Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment
Q2. Has the introduction of Goods and Services Tax (GST) led to an expansion of fiscal space for the states in India? Analyse. (250 Words)
Difficulty level: Easy
Reference: TH
Why the question:
The Goods and Services Tax (GST), in its six-and-a-half-year tenure, has generated nearly ₹3.4 lakh crore in revenues for October and November.
Key Demand of the question:
To write about GST, various successes and limitations of GST and reforms that are needed in it.
Directive word:
Analyse – When asked to analyse, you must examine methodically the structure or nature of the topic by separating it into component parts and presenting them in a summary.
Structure of the answer:
Introduction:
Begin by the aims and objectives behind the launch of GST.
Body:
First, write how GST has led to fiscal expansion for states in India. Substantiate with examples, facts or statistics.
Next, write about the shortcomings of GST e.g., Revenue Shortfall, Incomplete Compensation Mechanism, Limited Autonomy in Tax Rate Decisions for states, Compliance Challenges, etc.
Next, suggest reforms in GST.
Conclusion:
You may conclude as:
The introduction of GST in India has broadened states’ fiscal capacity by boosting compliance and revenue predictability. To maximize GST’s potential, the inclusion of petroleum, electricity, and real estate is essential. Additionally, promoting cooperative federalism involves reducing the central government’s unilateral imposition of non-shareable cesses and surcharges.
