GST will reduce prices, increase GDP growth - ASSOCHAM Study
A rational Goods and Services Tax (GST) could increase GDP growth rate by 1.4 to 1.7 per cent with an annual revenue increase of Rs 1.2 lakh crore at current level; The tax GDP ratio too may go up by 1.5 to 2 per cent with net revenue jumping by Rs 1.5 lakh crore a year, according to a recent study by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
“With a significant reduction in tax administration costs due to simple uniform structure, overall cost – and thus prices – of goods manufactured locally may reduce by 10 per cent,” said the chamber that has organised over 30 conferences on the subject in various states.
Export costs will reduce due to zero rating of central GST and state GST with annual savings in the range of Rs 48,000 crore. While imports parity with domestic goods will change due to dual GST on imports, services will cost more because of dual tax incidence.
The GST will create a single Indian common market with supply chain efficiencies and scale up the economy, said the ASSOCHAM study. There will be no distinction between goods and services with seamless input tax credit allowed throughout the supply chain.
Thus GST will be a destination-based consumption tax borne by ultimate consumer. It is crucial for international competitiveness, revenue buoyancy and economic growth. GST will be the biggest game changer for all stakeholders – industry, trade, investors, central and state governments, and consumers.
State GST on electronically transmitted inter-state services will be a major challenge if states apply different rates, according to the study. Accounting and information technology systems will also need to be aligned so that required details can be accessed to avail full input tax credit and avoid tax losses.