Question

Explain how, Goods and Services Tax (GST) has simplified the multiplicity of taxes on goods and services.

Answer 1

The introduction of Goods and Services Tax (GST) has significantly streamlined India's tax system by replacing multiple indirect taxes with a single unified tax structure. It has simplified the taxation process in the following ways:

1. Elimination of Multiple Taxes: GST has replaced various indirect taxes like VAT, Service Tax, Excise Duty, Central Sales Tax, and Octroi, reducing the complexity of multiple tax laws.
2. One Nation, One Tax: A uniform GST system ensures that the same tax rates apply across states, eliminating discrepancies and tax rate variations.
3. Reduction in Cascading Effect (Tax on Tax): Under the previous system, taxes were levied on already taxed goods/services. GST allows for Input Tax Credit (ITC), ensuring tax is only paid on the value added at each stage.
4. Ease of Compliance: Businesses can file tax returns online through the GST portal, reducing paperwork and administrative burden compared to multiple tax filings under different laws.
5. Transparent Taxation: GST has reduced hidden taxes, making the taxation system more transparent and consumer-friendly, as the final tax burden is clearly visible on invoices.
6. Boost to Interstate Trade: Previously, different state taxes created barriers to trade. With GST, a single tax structure promotes the free movement of goods and services across states.