The Goods and Services Tax (GST), likely to be introduced next year, will lead to buoyancy in government revenues by R1.5 lakh crore and increase the country?s GDP by 1.4% to 1.6%. With Indian economy integrating with world markets, manufacturers have to compete within and outside the country.
To get a competitive edge, the introduction of GST will be a crucial reform to remove cascading of taxes, leading to reduction in prices of most manufactured goods by about 10%, said the Associated Chambers of Commerce and Industry of India (Assocham).
?Once GST replaces all multiple taxes, it is going to be the biggest tax reform in independent India?s history,? it said in a recent study titled ?GST ? Beyond Growth.? A simplified tax structure will lead to annual savings of R1.2 lakh crore at the current nominal rate of GDP. Reduction in tax cost will lead to a favourable impact on tax compliance, economies of scale, supply chain efficiencies and thus higher economic growth.
The tax GDP ratio too may go up by 1.5% to 2% with net revenue jumping by R1.5 lakh crore a year. The GST will create a single Indian common market and there will be no distinction between goods and services with seamless input tax credit allowed throughout the supply chain.
While a constitutional amendment is being considered by a Parliamentary Standing Committee, next financial year (April 2012 to March 2013) is the time set for implementing GST, which is a comprehensive value added tax on goods and services levied at each stage of supply chain.
However, approval from two-third of parliamentarians and half of the 29-plus states is a must for it to take shape.