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Question

What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)'?

1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
2. It will drastically reduce the ‘Current Account Deficit' of India and will enable it to increase its foreign exchange reserves.
3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future.

Select the correct answer using the code given below:
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer:

A

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Explanation:

The implementation of Goods and Services Tax (GST) in India has several advantages, and one of the most significant advantages is that it replaces multiple taxes collected by multiple authorities and creates a single market in the country. By eliminating various indirect taxes such as central excise, service tax, and state-level taxes like VAT and sales tax, GST simplifies the taxation system and reduces the compliance burden on businesses. It streamlines tax administration and makes it easier for businesses to operate across different states.

However, the implementation of GST does not directly impact the Current Account Deficit (CAD) or the growth and size of the economy to the extent mentioned in options 2 and 3. While GST can have positive indirect effects on the economy, such as improving tax collection efficiency and promoting formalization of the economy, its impact on factors like CAD and overtaking China's economy is complex and depends on various other factors.

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