Q. Consider the following statements:
Statement-I: Goods and Services Tax (GST) has reduced state fiscal autonomy.
Statement-II: Under GST, states cannot independently decide tax rates.
Which one of the following is correct in respect of the above statements?
Quarterly-SFG-Jan-to-March
Red Book

[A] Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I

[B] Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I

[C] Statement-I is correct but Statement-II is incorrect

[D] Statement-I is incorrect but Statement-II is correct

Answer: A
Notes:

Explanation –

Statement I is correct. The implementation of GST has centralized the tax system, reducing the fiscal autonomy of states by subsuming many state taxes and limiting their ability to independently generate revenue.

Statement II is correct. Under the GST regime, states do not have the power to set their own tax rates independently, which is a key aspect of fiscal autonomy.

Therefore, Statement-II provides a direct explanation for Statement-I. The inability of states to set their own tax rates under GST is a significant reason why their fiscal autonomy has been reduced.

Source: The Hindu

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