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Top 5 Objectives of GST

Top 5 Objectives of GST highlight the comprehensive nature of GST as a reform aimed at creating a more efficient, fair, and growth-oriented tax system. Checkout the article on the top 5 objectives of GST
authorImageShruti Dutta10 Jun, 2024
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Top 5 Objectives of GST

Objectives of GST: Implementing the Goods and Services Tax (GST) in India heralded a paradigm shift in the country's indirect tax regime. Designed with many objectives, GST aimed to revolutionise the tax structure, foster economic growth, and enhance tax compliance. This article delves into the top 5 objectives of GST implementation, dissecting each goal to understand its significance and impact on the Indian economy. From simplifying the tax structure to promoting the 'Make in India' initiative, we uncover how GST endeavours to reshape the nation's fiscal landscape, driving towards a more efficient, transparent, and equitable tax system.

What is Goods and services tax (GST)?

The Goods and Services Tax (GST) is an indirect tax imposed by the government on most goods and services. It is incorporated into the price of goods and services, meaning consumers pay this tax when purchasing. Companies collect the tax from consumers and remit it to the government. In some regions, GST is called Value-Added Tax (VAT). The Goods and Services Tax Act was enacted by the Indian Parliament on March 29, 2017, and went into effect on July 1, 2017. This tax system, introduced by the Indian Government, replaced many other indirect taxes nationwide. In essence, GST is applied to the provision of goods and services. India's Goods and Services Tax Law is a comprehensive, multi-stage, destination-based tax levied on each value addition.
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Objectives of GST

The objectives of the Goods and Services Tax (GST) system in India are multifaceted, aimed at streamlining the indirect tax structure, enhancing tax compliance, and fostering economic growth. Some of the key objectives of GST include:
  • Establishing a Unified Market through Standardized Taxation
Implementing the Goods and Services Tax (GST) has streamlined India's market by introducing a singular tax regime, effectively replacing the convoluted network of state and central taxes that previously varied across regions. This legislative measure has instilled uniformity in taxation, simplifying the tax framework and facilitating the seamless movement of goods and services across state borders, free from additional tax burdens. The adoption of GST has nurtured a more cohesive and inclusive economic landscape, promoting equitable competition and facilitating nationwide business expansion, particularly for startups and small enterprises, by alleviating concerns regarding disparate tax regulations. Impact : This initiative has significantly alleviated logistical and compliance intricacies for businesses operating across state boundaries. Moreover, GST has reduced the cost of goods and services, enhancing supply chain efficiency. Consequently, businesses have benefited from decreased transaction expenses, while consumers have gained access to a wider array of products at more affordable prices, thus driving demand and fostering economic growth.
  • Mitigating Tax Cumulation and Duplication
Before GST, businesses encountered the challenge of tax cumulation, whereby the final consumer bore the brunt of multiple layers of taxation embedded within the cost of goods and services. Objectives of GST address this issue by implementing an inclusive input tax credit system, enabling businesses to claim credits for taxes paid on input services. This approach substantially mitigates the cascading effect of taxes, ensuring that taxation is levied solely on value addition at each stage of the supply chain, consequently reducing costs for consumers and fostering transparency in the taxation process. Impact : Eliminating tax cascading has resulted in a transparent and equitable pricing mechanism where consumer prices reflect actual value addition. With GST, goods and services have become more affordable for consumers, enhancing the competitiveness of Indian products in international markets. Additionally, it has facilitated resource allocation efficiency within the economy, contributing to improved profit margins and reduced tax liabilities for businesses. This conducive environment has catalysed growth and expansion opportunities.
  • Consolidating Indirect Taxation
An Objectives of GST is its capacity to amalgamate most pre-existing indirect taxes levied by state and central governments, including excise duty, service tax, VAT, and others. This consolidation has significantly diminished tax multiplicity, compliance obligations, and the likelihood of double taxation, simplifying the tax landscape for businesses. Moreover, it has streamlined the government's tax administration processes, bolstering tax collection and enforcement efficiency. Impact: By consolidating various indirect taxes into a single levy, GST has streamlined tax administration and minimised tax jurisdiction and interpretation disputes. This has engendered a stable and predictable tax environment, fostering domestic and international investment. GST has translated into reduced tax collection costs and enhanced operational efficiency for the government.
  • Curbing Tax Evasion
GST fosters a transparent and straightforward tax system. Every transaction and sale is meticulously recorded through a unified platform, making it arduous for businesses to conceal or manipulate their sales figures to evade taxes. This system mandates that businesses accurately report their transactions to claim tax credits, incentivising honest record-keeping practices. Consequently, the government can effectively monitor transactions and ensure the collection of accurate tax amounts, consequently mitigating tax evasion. Impact : Reducing tax evasion through GST has engendered fairness in taxation, alleviating the burden on honest taxpayers while bolstering government revenue without necessitating tax rate hikes. Moreover, the curtailment of tax evasion fosters a level playing field for businesses, thwarting the ability of dishonest entities to undercut competitors through tax avoidance practices. This dynamic encourages healthy competition and enhances consumer access to quality products and services at competitive prices.
  • To Combat Tax Evasion
The implementation of GST laws in India represents a significant tightening of tax regulations compared to previous indirect tax laws. Under GST, taxpayers are only eligible to claim input tax credits based on invoices submitted by their suppliers, reducing the likelihood of fraudulent claims on fake invoices. The recent introduction of e-invoicing has further bolstered these efforts. Moreover, GST's nationwide scope and centralised surveillance system enable expedited and more effective crackdowns on tax defaulters. Consequently, the Objectives of GST have substantially mitigated tax evasion and significantly reduced the occurrence of tax fraud. Impact : The stringent regulations and enhanced monitoring mechanisms implemented under GST have significantly impacted tax compliance and fraud prevention. By restricting input tax credit claims to invoices uploaded by genuine suppliers, GST has markedly reduced the incidence of fraudulent claims on fake invoices. E-invoicing has further fortified these efforts, ensuring greater transaction accuracy and transparency. Moreover, the nationwide implementation of GST and the establishing of a centralised surveillance system have expedited the detection and prosecution of tax defaulters. This swift and efficient response to non-compliance has acted as a deterrent against tax evasion, bolstering overall tax compliance rates.

What Are the Components of GST?

Under the Goods and Services Tax (GST) system, three taxes are applicable: the Central Goods and Services Tax (CGST), the State Goods and Services Tax (SGST), and the Integrated Goods and Services Tax (IGST).
  • CGST : The Central Government levies this tax on intra-state sales, such as transactions within a single state like Maharashtra.
  • SGST : This is the tax the respective state governments collect on intra-state sales, such as transactions within Maharashtra.
  • IGST : The Central Government collects this tax on inter-state sales, such as transactions from Maharashtra to Tamil Nadu.

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Top 5 Objectives of GST  FAQs

What are GST's foundational components?

GST is supported by four essential pillars: CGST, SGST, IGST, and Cess. Collectively, these pillars form the structure of the Goods and Services Tax system.

What is the purpose of GST audit?

A GST audit ensures the accuracy of claimed refunds, declared turnover, input tax credits, and paid taxes. It also aims to verify compliance with the GST Act 2017, particularly regarding the Input Tax Credit availed.

What are the objectives of the CGST Act?

The CGST Act primarily aims to address various challenges in the taxation system. It seeks to eliminate issues like double taxation high tax burdens (such as octroi, entry tax, and check posts) and introduce a simplified compliance mechanism in India.
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