Global ratings agency Moody's on Sunday said the Goods and Services Tax (GST) regime will be positive for India's credit profile as it will contribute to productivity gains and higher GDP growth as well as support higher government revenue generation through improved tax compliance.
Meanwhile, premier industry body Confederation of Indian Industry (CII) said the Indian industry is prepared for the roll-out of the GST, adding that the regime will contribute to ease of doing business and accelerate new business ventures.
William Foster, Vice-president, Sovereign Risk Group, Moody's Investors Service, said, “Over the medium term, we expect that the GST will contribute to productivity gains and higher GDP growth by improving the ease of doing business, unifying the national market and enhancing India's attractiveness as a foreign investment destination.”
It will also support higher government revenue generation through improved tax compliance and administration, he said in a statement, adding that both will be positive for India's credit profile, which is constrained by a relatively low revenue base.
He further said, “We expect improved tax compliance to be driven by: (1) incentivisation of tax credits in a GST system; (2) greater ease of compliance through usage of a common, shared IT infrastructure between the central government and the states; and (3) a reduction in the overall cost of compliance from simplified tax rates, uniform across the country. We expect the net impact of GST on government revenues to be positive.”
Shobana Kamineni, President, CII, said, “… it (GST) gives us tremendous confidence that the Government will continue to facilitate investments and simplify the business environment. CII and Indian industry is committed to ensuring the success of GST for boosting India's growth and development.”
To ensure a successful rollout, the CII has undertaken to hold about 100 GST clinics across the country while also bringing out informative webinars for the benefit of industry, she said.
The CII president said the GST is based on self-compliance with the input tax credit as a powerful incentive to businesses to step into the tax fold. “Input tax credit will curb inflation by avoiding tax-on-tax. We believe that most businesses would pass on the benefits of input tax credit to consumers so that inflation would be curbed,” she said.
