Goods and Services Tax (GST)
Indian Economy
- PYQs8
- Articles1
Background
GST is a fundamental tax reform impacting India's federal structure, tax revenue, ease of doing business, and overall economic growth. Its implementation challenges, revenue implications, and impact on inflation are recurring themes in UPSC examinations.
The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based tax levied on every value addition. It was introduced in India on July 1, 2017, subsuming various central and state indirect taxes like excise duty, service tax, VAT, etc., aiming to create a unified national market and reduce the cascading effect of taxes.
Facts & tables
- Implementation Date
- July 1, 2017
- Taxes Subsumed
- Subsumed 17 major indirect taxes and 13 cesses
- Governing Body
- GST Council (constitutional body)
- Components
- CGST, SGST, IGST, and UTGST
| Type | Reference |
|---|---|
| Conceptual area | Public Finance & Taxation |
| Body | Role |
|---|---|
| GST Council | Governs |
| Central Board of Indirect Taxes and Customs (CBIC) | Implements |
Prelims angle
Prelims angle: Multi-statement analysis
Prelims angle: Conceptual understanding
- Destination-based consumption tax, unified national market.
- Subsumed multiple central and state indirect taxes.
- GST Council is the key federal governing body.
- Challenges include input tax credit, litigation, federal balance.
- Recent revenue buoyancy partly driven by imported inflation and rupee depreciation.
Check if created by Constitution or by Parliament.
| Year | Framing tags |
|---|---|
| 2025 | Multi-statement analysis, Factual recall |
| 2023 | Multi-statement analysis, Factual recall |
| 2023 | Multi-statement analysis, Factual recall |
| 2018 | Factual recall, Multi-statement analysis |
| 2018 | Factual recall, Multi-statement analysis |
| 2017 | Multi-statement analysis, Factual recall |
| 2017 | Multi-statement analysis, Conceptual understanding |
| 2016 | Statement-based questions, Multi-statement analysis |
Timeline
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Public Finance & Taxation
Conceptual area
-
Prelims 2016
Statement-based questions, Multi-statement analysis
-
Prelims 2017
Multi-statement analysis, Factual recall
-
Prelims 2017
Multi-statement analysis, Conceptual understanding
-
Prelims 2018
Factual recall, Multi-statement analysis
-
Prelims 2018
Factual recall, Multi-statement analysis
-
Prelims 2023
Multi-statement analysis, Factual recall
-
Prelims 2023
Multi-statement analysis, Factual recall
-
Prelims 2025
Multi-statement analysis, Factual recall
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Unwelcome surge: On the buoyancy in GST collections
GST is India's unified indirect tax, replacing multiple central and state levies, aiming for a common market and reduced tax cascading. Recent collections show buoyancy, but analysis reveals significant contribution from imported inflation and currency depreciation, rather than solely domestic value addition, indicating a potentially 'unwelcome surge'.
See also
No related topics linked yet.
Past papers
2016–2025 · 8 questions
In the news
Unwelcome surge: On the buoyancy in GST collections
GST is India's unified indirect tax, replacing multiple central and state levies, aiming for a common market and reduced tax cascading. Recent collections show buoyancy, but analysis reveals significant contribution from imported inflation and currency depreciation, rather than solely domestic value addition, indicating a potentially 'unwelcome surge'.
Try these PYQs
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 the economy of India and will enable it to overtake China in the near future.
Select the correct answer using the code given below:
Statement 1 is Correct: Goods and Service Tax (GST) replaces multiple indirect taxes levied by central and state governments, creating a unified market. This can simplify tax compliance and potentially reduce the cost of goods and services for consumers. Statement 2 is Incorrect: While GST can improve efficiency in tax collection, it's not a direct solution to the current account deficit, which is influenced by factors like trade balance and foreign investment. Statement 3 is Incorrect: The impact of GST on economic growth is complex and depends on various other factors. It's unlikely to solely propel India's economy to overtake China's in the near future.
Therefore, the most likely advantage of GST is 1 only. Hence, option A is the correct answer.
Consider the following items:
1. Cereal grains hulled
2. Chicken eggs cooked
3. Fish processed and canned
4. Newspapers containing advertising material
Which of the above items is/are exempted under GST (Goods and Services Tax)?
List of Tax-exempted Goods are;
- Several food items have been exempted from any of the tax slabs. Fresh meat, fish, chicken, eggs, milk, buttermilk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, all kinds of salt, jaggery and hulled cereal grains have been kept out of the taxation system. - Bindi, sindoor, kajal, Palmyra, human hair and bangles also do not attract any tax under GST. - Drawing or colouring books alongside stamps, judicial papers, printed books, newspapers also fall under this category.
Which of the following statements with regard to recommendations of the 15th Finance Commission of India are correct?
I. It has recommended grants of ₹4,800 crores from the year 2022–23 to the year 2025–26 for incentivizing States to enhance educational outcomes.
II. 45% of the net proceeds of Union taxes are to be shared with States.
III. ₹45,000 crores are to be kept as performance-based incentive for all States for carrying out agricultural reforms.
IV. It reintroduced tax effort criteria to reward fiscal performance.
Select the correct answer using the code given below.
The 15th Finance Commission made recommendations to promote better fiscal discipline, education, and agriculture reforms, while adjusting tax devolution among states. ✅ Statement I: Correct 4,800 crores were recommended (2022–23 to 2025–26) to incentivize states for improving educational outcomes. ❌ Statement II: Incorrect The Commission recommended 41% of Union taxes to be shared with states, not 45%. ✅ Statement III: Correct It proposed a ₹45,000 crore performance-based incentive for states to implement agricultural reforms. ✅ Statement IV: Correct It reintroduced the 'tax effort' criterion, rewarding states that better mobilize revenue in relation to their GSDP.
Consider the following statements:
Statement-I: Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is exempted from tax, but the dividend is taxable.
Statement-II: InvITs are recognized as borrowers under the 'Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002'.
Which one of the following is correct in respect of the above statements?
* Statement I is Incorrect : Earlier, InvITs offered some tax benefits to investors. However, the budget in 2023 changed the taxation structure. Currently, all income distributed by InvITs, including interest income, dividend income, and rental income, is taxable in the hands of the unitholders according to their income tax slab. * Statement II is Correct : InvITs are indeed recognized as borrowers under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). This Act allows InvITs to access various financing options and enforce security interests in case of defaults.
Consider the following statements :
1. Tax revenue as a percent of GDP of India has steadily increased in the last decade.
2. Fiscal deficit as a percent of GDP of India has steadily increased in the last decade.
Which of the statements given above is/are correct?
Statement 1 is incorrect: Tax revenue as a percent of GDP in India has not steadily increased over the last decade. It has fluctuated — for instance, it rose during periods of strong economic growth but fell during years like 2019–20 and 2020–21 (due to slowdown and the pandemic). Hence, the trend is not steadily upward. Statement 2 is incorrect: Fiscal deficit as a percent of GDP has also not steadily increased. It narrowed from around 4.5% in 2013–14 to about 3.4% in 2018–19, then spiked during the COVID-19 years (to around 9.2% in 2020–21) and has gradually declined since. Thus, there has been no steady increase over the decade.
Show 3 more PYQs
Consider the following statements :
Statement-I : India accounts for 3.2% of global export of goods.
Statement-II :Many local companies and some foreign companies operating in India have taken advantage of India's 'Production-linked Incentive' scheme.
Which one of the following is correct in respect of the above statements?
* Statement I is incorrect: India's share in global merchandise trade is only 1.8% and 4% in global services. India plans to increase its export share in global trade from 2.1% to 3% by 2027 and 10% by 2047. * Statement II is correct: The PLI scheme is open to both domestic and international manufacturers. Samsung as well as Indian firms such as Dixon Technologies, UTL, Neolyncs, Lava International, Optiemus Electronics and Micromax are also expanding their factories to take advantage of the PLI scheme.
Regarding the taxation system of Krishna Deva, the ruler of Vijayanagar, consider the following statements :
1. The tax rate on land was fixed depending on the quality of the land.
2. Private owners of workshops paid an industries tax.
Which of the statements given above is/are correct?
Both statements (1 and 2) are correct regarding the taxation system of Krishna Deva Raya, the ruler of Vijayanagar. Statement 1 is correct. Land tax based on quality The Vijayanagara Empire, under Krishna Deva Raya, had a well-defined taxation system. Land revenue was the primary source of income, and the tax rate was determined based on the land's quality, fertility, and irrigation methods. This ensured a fair system where more productive lands yielded higher tax revenue. Statement 2 is correct. Industry tax, besides land tax, the empire levied taxes on various professions and activities. Private workshops and businesses likely paid an industry tax, contributing to the state's treasury.
With reference to the governance of public sector banking in India, consider the following statements
1. Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.
2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.
Which of the statements given above is/are correct?
Statement 1 is incorrect. The govt has been infusing large amounts in seven public sector banks through recapitalisation bonds but this has not been steady as statement 1 says. Statement 2 is correct. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected. For example, the merger of SBI associate banks will result in the creation of a stronger merger entity. Hence, option C is the correct answer.