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In other words, Goods and Service Tax (GST) is levied on the supply of goods and services.
Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax
that is levied on every value addition. GST is a single domestic indirect tax law for the entire
country.
Objectives of GST:
· The main objective of GST is to create a common market with uniform tax rate in India.
(One Nation, One Tax, One Market)
· To eliminate the cascading effect of taxes, GST allows set-off of prior taxes for the same
transactions as input tax credit.
· To boost Indian exports, the GST already collected on the inputs will be refunded and
thus there will be no tax on all exports.
· To increase the tax base by bringing a higher number of taxpayers and increase tax
revenue.
· To simplify tax return procedures through common forms and avoidance of visiting tax
departments.
· To provide online facilities for payment of taxes and submission of forms. Goods and
Services Network (GSTN), a robust Information Technology system has been created for
the operation of GST.
Advantages of GST:
· Removing the cascading effect of tax
· The tax rate of nearly 200 items had been reduced by GST council and the number of tax
items that were in the 28% tax slab reduced from 178 to 50
· The core purpose of bringing GST is uniformity of tax rates and structures, easy
compliance, improved competitiveness and gains to manufacturers and exporters,
removal of cascading taxes, thus paving the way for reduction in prices. Uniformity of
taxes, removal of cascading tax and transparent system of taxes have been achieved to
a great extent. But the core object of reduction in prices is yet to be achieved.
· Competitiveness in the global market, by virtue of GST- Consumer Price Index of March
2018 stood at 136.50, (one year after GST), whereas it stood at 136.40 in March 2017, but
now in October 2020, it reached all time high of 158.40 points, which shows one of the
objectives of GST has been achieved
· Ease of doing business and transparency had improved considerably with the introduction
of GST, it has improved its ranking by 79 positions in five years reaching 63rd position
among 190 nations
· The number of tax return filers have increased from 25,000 to 2,25,000 within one year of
implementing GST
· Within a year of implementing GST, the total revenue collected was Rs 7.19 lakh crore
which includes Rs 1.19 lakh crore CGST, Rs 1.72 lakh crore SGST and Rs 3.66 Lakh
crore of Integrated GST
Answer 5.
2. Growth Promotion
4. High employment
6. Interest-rate stability
1) Price Stability: This is the primary & main objective. Price stability is desirable in a
developing country like India, because a rising price level (inflation) creates considerable
uncertainty in the economy. It mainly is connected with the inflation rate.
The types of inflation are creeping inflation, walking inflation, galloping inflation.
Creeping inflation of 2-3 % is ideal for Indian economy. Zero inflation is not desirable as it
doesn’t increase the standard of living of people.
2) Growth Promotion: The goal of steady economic growth is closely related to the high
employment goal, because businesses are more likely to invest in capital equipment to
increase productivity and economic growth when unemployment is low. Conversely, if
unemployment is high and factories are idle, it does not pay for a firm to invest in additional
plants and equipment.
Although the two goals are closely related, policies can be specifically aimed at promoting
economic growth by directly encouraging firms to invest or by encouraging people to save,
which provides more funds for firms to invest.
3) Exchange Rate Stability: With the increasing importance of international trade to the
Indian economy, the value of the rupee relative to other currencies has become a major
consideration for the RBI. A rise in the value of the rupee makes Indian industries less
competitive with those abroad, and declines in the value of the rupee stimulate inflation in
India.
Fluctuation in case of exchange rate should be minimum. A stable rate is desirable for the
economy. Too much of volatility causes damage to the economy where the inflow of Foreign
Institutional Investment & Foreign Direct Investment are affected.
Exchange rate stability is important for countries like Singapore. India should follow a multi
objective approach for stability.
In addition, preventing large changes in the value of the rupee makes it easier for firms and
individuals purchasing or selling goods abroad to plan ahead. Stabilising extreme movements
in the value of the rupee in foreign exchange markets is thus viewed as a worthy goal of
monetary policy.
4) High employment:
High employment is a desirable goal of monetary policy for two main reasons:
(1) High unemployment causes much human misery, with families suffering financial distress
and loss of personal self- respect
(2) When unemployment is high, the economy has not only idle workers but also idle
resources (closed factories and unused equipment), resulting in a loss of output (lower GDP).
So, society’s actual output or GDP will be less than its potential (full employment) output.
6) Interest-rate stability:
Interest-rate stability is desirable because fluctuating interest rates can create uncertainty in
the economy and make it more and more difficult to plan for the future. Fluctuations in
interest rates also affect consumers’ willingness to buy durable goods, such as houses, motor
cars, refrigerators, washing machines or even personal computers.
Central banks usually set up the minimum amount of reserves that must be held by a
commercial bank. By changing the required amount, the central bank can influence the
money supply in the economy. If monetary authorities increase the required reserve amount,
commercial banks find less money available to lend to their clients and thus, money supply
decreases.
Commercial banks can’t use the reserves to make loans or fund investments into new
businesses. Since it constitutes a lost opportunity for the commercial banks, central banks pay
them interest on the reserves. The interest is known as IOR or IORR (interest on reserves or
interest on required reserves).
The central bank can either purchase or sell securities issued by the government to affect the money
supply. For example, central banks can purchase government bonds. As a result, banks will obtain
more money to increase the lending and money supply in the economy.