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Comprehension:

Read the passage carefully and answer the questions based on the passage:

GST: One Nation, One Tax, One Market

Goods and Service Tax (GST) is the single comprehensive indirect tax, operational from 2017, on supply of goods and services, right from the manufacturer/service provider to the consumer. It is a destination based consumption tax with facility of Input Tax Credit in the supply chain. It is applicable throughout the country with one rate for one type of goods/service. It has amalgamated a large number of Central and State taxes and cesses. It has replaced large number of taxes on goods and services levied on production/sale of goods or provision of service. Under GST, the tax is discharged at every stage of supply and the credit of tax paid at the previous stage is available for set off at the next stage of supply of goods and/or services. It has replaced various types of taxes/cesses, levied by the Central and State/UT Governments. Under GST, there are six standard rates applied on supply of all goods and/or services across the country. The 101th Constitution Amendment Act introduced Article 246A in the Constitution cross empowering Parliament and Legislatures of States to make laws with reference to Goods and Service Tax imposed by the Union and the States. GST has simplified the multiplicity of taxes, facilitated freedom of movement, created a common market in the country, standardized laws, procedures and rates of taxes across the country, aimed at reducing the cost of business operations and cascading effect of various taxes on consumers. It has also reduced the overall cost of production, which will make Indian products/services more competitive in the domestic and international markets.

Goods and Service Tax, the single comprehensive indirect tax on all goods and services, extends the principle of one of the following

Solution

✅ Correct Option: 3

Option 1 -> Central Sales Taxation is a tax on inter-state sales but doesn't form the basis of GST's comprehensive structure.

Option 2 -> Central Excise Duty applies only to manufacturing stage, whereas GST covers the entire supply chain.

Option 3 -> Value-added taxation is the foundational principle where tax is levied on value addition at each stage with input tax credit mechanism.

Option 4 -> Sales Taxation is a traditional tax system that doesn't allow seamless credit flow like GST does.


Hence, Option 3: Value-added taxation -> GST extends the principle of Value Added Tax (VAT) by implementing a comprehensive tax system where tax is charged on value addition at each stage of the supply chain. The input tax credit mechanism ensures that the tax burden is passed on seamlessly from manufacturer to consumer, eliminating the cascading effect of taxes (tax on tax). This makes GST a destination-based consumption tax that allows credit of input taxes paid at each stage, thereby taxing only the net value added. -> correct

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