GST to boost growth by 4.2%: Fed

The goods and services tax (GST) can boost India’s GDP growth by up to 4.2% — double the previous estimate — as lower taxes on manufactured goods will bump up output and make products cheaper, a U.S. Federal Reserve paper said. GST, it said, could reduce inefficiencies in the production process while eliminating the current compounding effect of central and state levies.

Dubbed as the biggest tax reform since Independence, GST will unify at least 10 indirect taxes to be collected at State and central levels. The Fed research note stated that assuming the aggregate weighted GST rate is 16%, there would be positive impact on real GDP of 4.2%.