CBSE Class 12-commerce Answered

Goods & Services Tax (GST) has an edge over the erstwhile Indirect Taxation system with regards to input tax credit. Previously while tax calculation the tax payer got input credit only for the Excise, Service and VAT portion. It means if CST, Customs or any other indirect taxes are payable during sale, no credit on such taxes could be setoff against the similar taxes paid during purchase of inputs for production. Unlike it, GST has optimal provision for availing Input Tax Credit, which has made GST cost efficient. Consequently, capital goods became cheaper than before causing multifold increase in domestic as well as Foreign Direct Investments. This has increased the production potential causing a rightward shift in the Production Possibility Frontier (PPF).