GST to boost Make in India, push exports

The Dollar Business Bureau

The long-delayed Goods and Services Tax (GST) Bill has finally received the Rajya Sabha nod on Wednesday. Government is targeting to roll out the landmark tax reform from April 1, 2017, to create a uniform tax structure for a market of 1.25 billion people.

GST is aimed at dismantling inter-state barriers to trade in goods and services by subsuming a slew of around 17 indirect taxes that include excise duty, service tax, VAT, CST, luxury tax, entertainment tax, entry tax and octroi.

After the passage of the GST Bill, Prime Minister Narendra Modi said, “GST is the best example of cooperative federalism and this reform will promote Make in India, help exports and thus boost employment while providing enhanced revenue.”

With the implementation of GST, the country will move towards a high growth trajectory in the next few years. Make in India programme would get a boost with improvement in ease of doing business, by doing away with multiple taxes and their cascading impact, according to PHD Chamber of Commerce Chief Economist and Director-Research S P Sharma.

GST would reduce the barriers between states and will make the country a common market, increase tax revenue for the states due to a wider tax base and better compliance. It will also help in reducing tax evasion, enable greater control and facilitate efficient monitoring than the traditional taxation system, he said.

Bimal Jain, Chairman - Indirect Tax Committee of the same industry body said that the subsuming of major central and state taxes in GST would reduce the cost of locally manufactured goods and services. This will increase the competitiveness of Indian goods and services in the international market and give boost to the exports from the country.

Another industry body Confederation of Indian Industry (CII) anticipates that implementation of GST would reduce transaction costs and boost GDP by 1.5 – 2 percent points. CII President Naushad Forbes said that the manufacturing sector, in particular, is expected to be a big beneficiary of GST as the economic system becomes more competitive.

As per Fitch Ratings, GST will remove barriers to trade, improve economic efficiency and lead to higher growth in the long run. This will result in a substantial simplification of the indirect tax system, leading to potentially significant productivity gains and boosting long-term growth. Fitch expects the government debt to reach 69.4 percent of GDP and the deficit to fall to 6.8 percent in FY 2017.