Mains Practice Questions

Approach

• Begin with a brief introduction to 101st Constitutional Amendment Act.
• Mention the significance of the Act and how it affects the country’s federalism.
• Conclude with a positive note and highlight the positive impacts of the Act.

Introduction

The process of simplification of the indirect tax system was achieved by introducing ‘Goods and Services Tax’ (GST) by the 101st Constitutional Amendment Act. GST consolidated the various taxes on goods and services into a single tax, thereby simplifying taxation across supply chain.

Body

Significance of the Act

• Subsumed Various Indirect Taxes: All taxes such as service tax, excise tax etc. are all subsumed under GST, thereby unifying the taxation in India.
• Reduced Compliance Burden: Calculation of tax has become easy under the GST regime therefore reducing the burden of compliance.
• Simplifying Tax Administration: Redundancies and duplication of efforts has been greatly reduced therefore simplifying taxation.
• Increased Ease of Doing Business: Taxation in few states and of certain types used to be a cumbersome process which has now been transferred online.
• Cascading Effect of Taxes: Levying of tax at every stage of production and therefore taxing a taxed product was done away with.
• Destination-based Taxation: Unlike Value Added Tax (VAT) which used to be charged at instance of manufacturing or selling, GST is a destination-based taxation system.

The Act and Federalism

• The Act came with a provision wherein the states were compensated for any loss that they incurred due to implementation of GST.
• The GST Council comprises of members from both Centre and State and decisions are based on consensus, therefore reinforcing cooperative federalism.
• Increased revenue due to GST has ensured more finances for both union and state governments helping develop more infrastructure.
• Inter-state barrier to trade have been greatly reduced by GST, therefore allowing business to operate across the country with much less hassle.

Conclusion

The 101^st Constitution Amendment Act, by implementing Goods and Services Tax has greatly helped with ease of doing business across states. The increased revenue for states and union governments allows for strengthening of federalism in the country with the objective of one nation, one tax.