"The success of a GST system is largely dependent on the width of its coverage."Comment.

Model Answer:
The success of GST tax regime will depend on the width of its coverage i.e larger the number of items for GST to be imposed; the larger is the tax collection and devolution. All items in the tax chain must ideally be included in the GST system to achieve the best results. It will eliminate the incidence of paying tax on taxes, reduce the cascading effect of a tax system and enables producers of goods and services to enjoy the set-off benefits on the taxes they may have paid at various intermediate stages.
            But, the proposed GST regime excluded potable alcohol, tobacco and petroleum products. Taken together, they account for a large chunk of the indirect taxes base in the country. This exclusion is largely triggered by some of the state governments desire to preserve their revenue. Beside this; the real estate sector will not be covered under the proposed GST. Thus, all construction activities and the expenditure incurred on them would be outside the GST chain. The new GST regime with all these imperfections may perpetuate the barriers. However, it would be good to make a beginning even with an imperfect GST, with all its flaws, as long as the government is committed to addressing the concerns that arise over time.

Topics: GS-III: Indian Economy Issues Relating to Planning