Assertion (A): GST, operational from 1 July 2017, has reduced the cascading effect of taxes on consumers.
Reason (R): Under GST, the credit of tax paid at the previous stage is available for set off at the next stage of supply.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both (A) and (R) are true and (R) is the correct explanation of (A).
Assertion (A): GST, operational from 1 July 2017, has reduced the cascading effect of taxes on consumers. — True. Before GST, tax was charged on the total value, including taxes already paid on inputs. This is cascading of tax.
Reason (R): Under GST, the credit of tax paid at the previous stage is available for set off at the next stage of supply. — True. This is the Input Tax Credit.
Why R explains A?
With the credit, each stage pays tax only on the value it adds. Tax is no longer charged on earlier taxes, so the cascading effect falls.
NCERT (2026-27): “Box 5.3: GST: One Nation, One Tax, One Market … As there have been a number of intermediate goods/services, which were manufactured/provided in the economy, the pre GST tax regime imposed taxes not on the value added at each stage but on the total value of the commodity/service with minimal facility of utilisation of Input Tax” “Credit (ITC). The total value included taxes paid on intermediate goods/services. This amounted to cascading of tax. 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 is thus effectively a tax on value addition at each stage of supply. …” |