FRBMA and GST

The Fiscal Responsibility and Budget Management Act (FRBMA), passed in 2003, set limits on deficits:

• bring the fiscal deficit down to 3% of GDP;
• eliminate the revenue deficit, and then build a revenue surplus;
• cut them step by step each year (the fiscal deficit by 0.3% of GDP, the revenue deficit by 0.5%);
• limit the government's borrowing from the RBI;
• present three policy statements with each budget, for transparency.

The Goods and Services Tax (GST), from 1 July 2017, is one tax on goods and services across India. It is destination-based: charged where goods are consumed.

Its key feature is input tax credit. A trader pays GST on what he sells, but subtracts the GST already paid on what he bought. So tax is paid only on the value added at each stage, and the old problem of cascading (tax charged on tax) ends.

Example: a trader buys goods for ₹200 plus ₹24 GST (12%) and sells them for ₹300 plus ₹36 GST. He pays the government 36 − 24 = ₹12: 12% of the ₹100 he added.

GST replaced many taxes: central excise, service tax, state VAT, octroi, entry tax and others. Its laws are the CGST, SGST and UTGST Acts, and returns are filed online.