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GST adoption could raise India's GDP to over 8%: IMF

IMF also questioned the uncertainties around the design and pace of implementation of the GST

Press Trust of India  |  Washington 


The adoption of the could help raise India's medium-term growth to over eight per cent and create a single national market for enhancing the efficiency of the movement of goods and services, the said on Wednesday. At the same time, the International Monetary Fund (IMF) also expressed concerns over the implementation of the Goods and Service (GST). "Although some uncertainties remain around the design and pace of implementation of the GST, its adoption is poised to help raise India's medium-term growth to above eight per cent as it will create a single national market and enhance the efficiency of intra-Indian movement of goods and services," the said in its annual country report on The said larger than expected gains from the and further structural reforms could lead to significantly stronger growth, while a sustained period of continued low global energy prices would also be beneficial to Noting that India's revenue-to-ratio (at around 17 and a half per cent) remains considerably below than its emerging market peers, the said the implementation of a robust should be a key priority given its growth-enhancing effects. "The should have minimal exemptions, uniform cross-state rates, and as few rate tiers as possible," it said. Key production inputs, such as energy and real estate, should be kept within the base to enable greater output gains and reduce the burden across sectors, the said. Rationalisation of the structure of direct taxes toward a lower corporate rate with smaller and streamlined deductions and exemptions should continue, it said. Efforts to improve administration should be stepped up as the scope for revenue gains is large. According to the report, Indian authorities were confident that the outstanding issues related to implementation could be settled promptly. "The would provide for a significant improvement over the current indirect system. reform priorities going forward include continuing the phased reduction of the corporate rate from 30 to 25 per cent over four years, coupled with a simultaneous reduction in deductions," it said. The replaces a plethora of cascading centre, state, interstate and local taxes with a single, nationwide, value-added on goods and services. said the destination-based will create, for the first time, a single Indian market, and will greatly enhance as an investment destination. By subsuming most of the existing indirect taxes, such as excise, sales and services levies, the indirect structure of the country will become less complex and the cost of doing business will decline. The Indian government expects to roll out by July 1 after it could not meet the April 1, 2016, target. Export competitiveness will rise as logistical costs fall with the removal of interstate tax-induced trade barriers, the system becomes more efficient, and use is made of input credits on cross-state trade, the said. It said the will also raise general government collection, including by fostering compliance and help ensure a decline in the share of the informal sector. Consequently, it can also support fiscal consolidation efforts which, in addition to economic efficiency gains, should solidify recent monetary policy strides in achieving low and stable inflation in the medium-term, it said.

First Published: Wed, February 22 2017. 20:57 IST