Which of the following statement (s) is/are correct in the context of tax reforms implemented in India since 1991?

Statement 1: Since 1991, there has been a continuous reduction in the taxes on individual incomes.

Statement 2: The rate of GST, which was very high earlier, has been gradually reduced.

Only Statement 1 is correct.

There are two types of taxes: direct and indirect. Direct taxes consist of taxes on incomes of individuals, as well as, profits of business enterprises. Since 1991, there has been a continuous reduction in the taxes on individual incomes as it was felt that high rates of income tax were an important reason for tax evasion. It is now widely accepted that moderate rates of income tax encourage savings and voluntary disclosure of income. The rate of corporation tax, which was very high earlier, has been gradually reduced.

In 2016, the Indian Parliament passed a law, Goods and Services Tax Act 2016, to simplify and introduce a unified indirect tax system in India. This law came into effect from July 2017.