Impact of the 101st Amendment on the Indian Economy
Unified Tax System: The 101st Amendment introduced the Goods and Services Tax (GST), replacing multiple indirect taxes with a single, nationwide tax. This unified India into one common market, making tax compliance easier and reducing the cascading effect of taxes (tax on tax).
Boost to Economic Growth: GST simplified the tax structure, reduced logistics and business costs, and improved the ease of doing business. The World Bank estimates GST could increase India’s GDP by 1-2% annually by making interstate trade smoother.
Increased Tax Revenue: The amendment broadened the tax base and improved compliance, leading to a 12% increase in tax collections for both central and state governments.
Strengthened Federalism: The GST Council, created by the amendment, ensures both Centre and States have a say in tax decisions. Revenue is now shared more fairly, and a compensation mechanism was set up to protect states from revenue loss for five years.
Consumer and Business Benefits: Consumers have benefited from lower prices and greater transparency, while businesses face fewer tax disputes and a more predictable tax environment.
Challenges: The transition was complex, with initial compliance issues and some states feeling a temporary loss of fiscal autonomy. However, consensus-building and compensation mechanisms helped ease these concerns.
In summary: The 101st Amendment was a landmark reform that unified India’s tax system, boosted economic growth, improved tax collections, and strengthened cooperative federalism
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