Goods and Services Tax (GST) is an indirect tax that came into effect on 1st July 2017 by replacing many indirect taxes in India such as the excise duty, VAT, services tax, etc. Goods and Service Tax (GST) is levied on the supply of goods and services and is a destination-based tax that is levied on every value addition.

Salient features of the Goods and Services Tax:

• GST is applicable on the ‘supply’ of goods or services as against the concept of the manufacture of goods or on sale of goods or provision of services.
• GST is based on the principle of destination-based consumption taxation as against the principle of origin-based taxation.
• India has a dual GST system with the Centre and the States simultaneously levying tax on a common base. The GST to be levied by the Centre is the Central GST(CGST) and that to be levied by the States is the State GST (SGST).
• An Integrated GST (IGST) is levied on the inter-state supply of goods or services. This is levied and collected by the Government of India and such tax is apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendation of the GST Council.
• Import of goods or services would be treated as inter-state supplies and would be subject to IGST in addition to the applicable customs duties.

Since its implementation in 2017, the GST has achieved the following milestones:

• Widening of India’s tax base: The tax base almost doubled from 66.25 lakhs to 1.28 crores in the last four years (2017-2021).
• Ease of compliance: It brought inefficiencies in indirect tax compliances and reduced the number of indirect tax authorities that businesses needed to interact with.
• Increased logistics efficiency: As per an estimate, it has saved over 50% of logistics effort and transit time of goods movement by eliminating the entry tax, and check-posts (inter-state barriers) and introducing nationwide e-way bills.
• Reduced transaction costs: By eliminating 2% of the additional cost (Central Sales Tax) on all interstate transactions, the GST has significantly reduced the overall transaction cost.
• Increase in transparency: It allows taxpayers to track their compliances online on the GST Portal, and get the basic information about any business by entering the respective PAN or GSTIN, etc, thus increasing transparency in the system.

However, several challenges still need to be addressed, such as:

• Overestimation of GST collection: Actual collection is lower than initial estimations, thereby raising questions on the efficacy of the GST regime.
• Complex tax slabs: A complex slab structure with frequent switching of items between them leads to confusion in the compliance system and unethical profiteering due to fluctuating tax rates.
• Complex and cumbersome filing structure: The current GST return filing structure puts the onus of burden on the taxpayer with requirements of possessing a valid tax invoice/debit note, actual receipt of goods/service by the recipient, etc., making it a complex and cumbersome tax regime.
• Ambiguous and conflicting AAR judgments: Conflicting rulings from various benches of the Appellate Authority for Advance Ruling across different States have led to confusion among taxpayers.
• Tax evasion and tax fraud: GST tax evasion and tax fraud, including the use of fraudulent invoices, fake e-way bills, etc have led to massive losses in revenue collection (approximately Rs. 40,000 crore).

While the government has worked to solve many issues, considerable intervention is still required to bring GST to its full efficiency. The proposal to have a single return will simplify compliance and do away with matching requirements. Such a step will bring out the true sense of ‘One Nation, One Tax’.

National Income Accounting (NIA) refers to methods or techniques used to measure the economic activity of a national economy as a whole. The national income of a nation can be calculated in terms of GDP, GNP, NDP, and NNP. However, the Gross Domestic Product (GDP) is the most acceptable indicator worldwide. GDP refers to the total market value of all the final goods and services produced in an economy in a given period. In India, GDP is estimated by the Central Statistical Office (CSO). Three methods used in its calculation are the added Method (or the Product Method), Income Method, and Expenditure Method.

Significance of national accounting:

• International comparison: National Income Accounting measures the growth rate and development of nations, which can be used to compare the standard of living of different countries.
• Business decisions: It reflects the relative contribution and potential of various sectors of the economy, which guides the business class to plan for future production.
• Policy formulation: It throws light on the distribution of income and resources in the economy, which helps the government in the proper allocation of resources to bring inequality and ensure the development of the nation.
• Policy evaluation: Income accounting identifies specific economic achievements and failures, which help the people of the nation in evaluating the policies of the government.
• Annual budget: It shapes the budgetary policy of the government, including borrowing and tax policy to neutralize the fluctuations of income and employment. The government adopts a deficit or surplus budget to arrest depression or inflation in an economy. The factors affecting the GDP of a country include:
• Natural resources: The geographical location and availability of natural resources like coal, iron and timber etc. affects the level of GDP. Capital: Capital is generally determined by investment that, in turn, depends on other factors like profitability, political stability, etc.
• Labor and entrepreneurship: The quality or productivity of human resources is more important than their number. Manpower planning and education affect the productivity and production capacity of an economy. Technology: This factor is relatively more important for nations with fewer natural resources. The development of technology is determined by the level of invention and innovation in production. Government: Through its policy intervention, the government can provide a favorable business environment for investment in addition to maintaining law and order. Political stability: A stable economy and political system helps in the appropriate allocation of resources. Wars, strikes, and social unrest will discourage investment and business activities.

The GDP as a parameter to judge economic growth is criticized on the fact that parameters like gender inequality, income inequality, and conditions of the poor are not reflected in it. Other indices like the Human Development Index (HDI), Gender Inequality Index (GII), etc. are used to take these parameters into account.