Question

Assertion (A): The goods and services tax is free from the cascading tax effect.

Reasoning (R): The final price of goods increased unnecessarily after the introduction of the goods and services tax.

Choose the correct option.

• A. Both A and R are true, and R is the correct explanation of A.
• B. Both A and R are true, but R is not the correct explanation of A.
• C. A is true, but R is false.
• D. A is false, but R is true.

Answer 1

The correct option is C A is true, but R is false.

Goods and services tax (GST) simplified the indirect tax system of India. Different indirect taxes were merged into GST. Earlier, the indirect tax system had different levels. Due to this, the final price of goods became unnecessarily higher than what it was supposed to be. However, the introduction of GST solved the problem of the cascading tax effect. It is charged on value addition and not the entire value of output. Due to this, the final price of goods became cheaper.