Roadmap for Answer Writing 1. Introduction Contextualize the issue: Begin by framing the issue of growing inequality in India. Refer to Oxfam’s 2023 report that highlights the wealth disparity (top 5% owning 60% of wealth, bottom 50% owning only 3%). Key question: Mention ...
The financial aspect of Centre-State relations in India has undergone significant changes with the implementation of the Goods and Services Tax (GST), also known as the "One Nation One Tax" regime. *Pre-GST Scenario:* 1. Multiple taxes: Central sales tax, state VAT, excise duty, etc. 2. Complex taxRead more
The financial aspect of Centre-State relations in India has undergone significant changes with the implementation of the Goods and Services Tax (GST), also known as the “One Nation One Tax” regime.
*Pre-GST Scenario:*
1. Multiple taxes: Central sales tax, state VAT, excise duty, etc.
2. Complex tax structure: Different tax rates, exemptions, and compliance requirements.
3. Revenue sharing: Centre and states shared taxes, with states receiving a significant portion.
*GST Regime (Post-2017):*
1. Unified tax: Single tax rate for goods and services across India.
2. Dual GST: Central GST (CGST) and State GST (SGST) components.
3. GST Council: Centre and states jointly decide tax rates, exemptions, and policies.
*Financial Implications:*
*Centre:*
1. Reduced revenue: GST rates lower than pre-GST taxes.
2. Compensation: Centre compensates states for revenue loss (5-year period).
*States:*
1. Increased autonomy: States have more control over taxation.
2. Revenue growth: GST revenue growth benefits states.
3. Dependence on Centre: States rely on Centre for compensation and GST Council decisions.
*Challenges:*
1. Revenue distribution: Disparities in revenue sharing between Centre and states.
2. Tax rate disputes: Differences in GST rates between Centre and states.
3. Compliance issues: Difficulty in implementing and enforcing GST.
*Benefits:*
1. Simplified tax structure
2. Reduced tax evasion
3. Increased transparency
4. Boost to economic growth
*Centre-State Relations:*
1. Cooperative federalism: GST Council promotes collaboration.
2. Increased dependence: States rely on Centre for revenue and policy decisions.
3. Potential conflicts: Disagreements over revenue sharing, tax rates, and exemptions.
*Reforms:*
1. Improve GST compensation mechanism
2. Enhance states’ autonomy in taxation
3. Streamline compliance procedures
4. Address revenue disparities
*Conclusion:*
The “One Nation One Tax” regime has transformed Centre-State financial relations in India. While challenges persist, the GST regime has simplified taxation, increased transparency, and boosted economic growth. Ongoing reforms aim to address revenue disparities, enhance state autonomy, and strengthen cooperative federalism.
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Model Answer Introduction India faces growing wealth inequality, with the top 5% of the population owning more than 60% of the country's wealth, while the bottom 50% possess only 3%, as per Oxfam's 2023 report. This stark disparity has sparked debates on whether implementing a progressive wealth taxRead more
Model Answer
Introduction
India faces growing wealth inequality, with the top 5% of the population owning more than 60% of the country’s wealth, while the bottom 50% possess only 3%, as per Oxfam’s 2023 report. This stark disparity has sparked debates on whether implementing a progressive wealth tax could address these inequalities.
Potential Benefits of a Wealth Tax
Challenges to Implementing a Wealth Tax
Conclusion
While a progressive wealth tax could address wealth inequality in India, its potential challenges—such as tax evasion, capital flight, and administrative costs—suggest that alternative fiscal policies may be more effective in reversing growing inequalities. Therefore, while the idea of a wealth tax is appealing, careful consideration of its implementation and possible alternatives is necessary.
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