Government Budget and GST

📘 NDA Economics · ECN05 📑 NDA Level : High Priority

NDA tests GST directly — when it was implemented, its structure (CGST/SGST/IGST), and the difference between direct and indirect taxes. Budget deficits are definitional questions at NDA level.

📌 NDA Pattern: Revenue vs Capital expenditure • Fiscal Deficit meaning • Direct vs Indirect tax • GST: date, structure, CGST/SGST/IGST • “One Nation One Tax”

1. Budget Structure

Revenue Expenditure: Day-to-day operations — salaries, interest payments, subsidies. Does NOT create assets. Recurring.
Capital Expenditure: Creates assets or reduces liabilities — roads, dams, defence equipment, railways. Non-recurring.
Revenue Deficit = Revenue Expenditure − Revenue Receipts.
Fiscal Deficit = Total Expenditure − Total Receipts (excluding borrowings). Government’s total borrowing requirement. FY26 target = 4.4% of GDP.
Primary Deficit = Fiscal Deficit − Interest Payments.

2. Direct vs Indirect Taxes & GST

Direct Tax: Paid directly by the person; cannot be shifted. Income Tax, Corporate Tax. Administered by CBDT.
Indirect Tax: Can be shifted to consumers in prices. GST, Customs Duty. Administered by CBIC.
GST (Goods and Services Tax): Implemented 1 July 2017. “One Nation, One Tax.” Replaced 17+ central & state taxes. Dual structure:
- CGST: Central GST — collected by Central Government on intra-state sales.
- SGST: State GST — collected by State Government on intra-state sales.
- IGST: Integrated GST — collected by Centre on inter-state sales; shared with destination state.
GST Council: Chaired by Union Finance Minister. Rate slabs: 0%, 5%, 12%, 18%, 28%.

📝 NDA PYQBudget & GST — NDA Pattern

Q1. GST was implemented in India from: (NDA I 2023)

(a) 1 April 2017 (b) 1 July 2017 (c) 1 January 2018 (d) 1 April 2018

Answer: (b) 1 July 2017
GST was launched on 1 July 2017 in a special midnight Parliament session. “One Nation, One Tax.” Replaced central excise, service tax, VAT, CST, entry tax and many others. 101st Constitutional Amendment. GST Council (Finance Minister chairs) decides rates.

Q2. Income Tax is an example of: (NDA II 2022)

(a) Indirect tax (b) Regressive tax (c) Direct tax (d) GST

Answer: (c) Direct tax
Direct tax = falls directly on the taxpayer; cannot be shifted. Income Tax, Corporate Tax = direct. GST = indirect (seller pays but passes on to buyer in price). Income Tax is also progressive (higher income → higher rate).

Q3. Which GST is levied on inter-state supply of goods and services? (NDA I 2024)

(a) CGST (b) SGST (c) IGST (d) UGST

Answer: (c) IGST (Integrated GST)
Intra-state (within one state) = CGST + SGST both apply. Inter-state (across states) = only IGST applies, collected by Centre, then revenue shared with destination state. UGST (Union Territory GST) applies in UTs without legislature.

📝 Rapid Revision — ECN05

📋 Deficits

Revenue Deficit = Rev Exp − Rev Receipts
Fiscal Deficit = Total Exp − Total Receipts (excl borrowing)
Primary Deficit = Fiscal Deficit − Interest
FY26 Fiscal Deficit target: 4.4% of GDP

📈 GST Quick

Implemented: 1 July 2017
Intra-state: CGST + SGST
Inter-state: IGST only
Council: chaired by Finance Minister
101st Constitutional Amendment

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