Call it a double edged sword. The much awaited Goods and Services Tax (GST) that is expected to be introduced next fiscal year can become the much needed weapon in the government's armor. Saddled with the twin problems of high inflation and high fiscal deficit, the government can use the GST regime to improve India's economic statistics. As per industry body ASSOCHAM, GST will enhance India's tax to GDP ratio by nearly 1.6%. The same will have a benign impact on the economy's fiscal deficit. Moreover, GST will remove cascading taxes, leading to reduction in prices of most manufactured goods by about 10%. This will certainly come as a relief to the policymakers as well as the central bank both of which have been trying their best to rein inflation. Higher savings, improved tax compliance, economies of scale, and supply chain efficiencies are expected to be the icings on the cake. While the much awaited fiscal reform sounds very promising, we really hope that the impleme ntation is satisfactory enough to deliver the desired results.
By J Mulraj
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