What is/are the most likely advantages of implementing ‘Goods and Services Tax (GST)’?

1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
2. It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves.
3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future.

Select the correct answer using the code given below:

Correct Answer: Option 1 (1 only)

Detailed Explanation:

The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based indirect tax system implemented in India to unify the national market under a common tax structure.

Let us analyze each of the given statements step-by-step:

Statement 1: "It will replace multiple taxes collected by multiple authorities and will thus create a single market in India."

• Correct: Prior to GST, India had a fragmented indirect tax system with various Central and State taxes (such as Central Excise Duty, Service Tax, VAT, Entry Tax, Luxury Tax, etc.). GST subsumed dozens of these indirect taxes under a single tax regime ("One Nation, One Tax, One Market"), thereby removing cascading tax effects and creating a unified national market.

Statement 2: "It will drastically reduce the ‘Current Account Deficit’ of India and will enable it to increase its foreign exchange reserves."

• Incorrect: While GST streamlines trade and may indirectly support exports by reducing transaction costs and eliminating tax cascading, it does not directly or "drastically" reduce the Current Account Deficit (CAD), nor does it guarantee a major boost to foreign exchange reserves. The CAD is heavily influenced by trade balances (like crude oil and gold imports), global commodity prices, and macro-financial factors beyond domestic indirect taxation.

Statement 3: "It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future."

• Incorrect: This is an exaggerated and unrealistic claim. While GST improves ease of doing business and boosts GDP growth modestly by improving efficiency and compliance, asserting that it will enable India to "enormously increase" its economy to overtake China in the near future is far-fetched and logically flawed.

Conclusion:

Since only Statement 1 is a valid and direct advantage of implementing GST, the correct choice is 1 only.