Economic Survey: GST will improve tax compliance and create common Indian market
New Delhi: The Economic Survey 2016-17 presented in Parliament today states that the Goods and Service Tax (GST) will create a common Indian market, improve tax compliance and governance, and boost investment and growth; it is also a bold new experiment in the governance of India’s cooperative federalism.
The Economic Survey tabled in Parliament by Finance Minister Arun Jaitley stated that against the backdrop of robust macro-economic stability, the year was marked by two major domestic policy developments - the passage of the Constitutional Amendment, paving the way for implementing the transformational Goods and Services Tax (GST), and the action to demonetise the two highest denomination notes.
The Survey Report says that demonetisation has had short-term costs but holds the potential for long-term benefits. Follow-up actions to minimise the costs and maximise the benefits include: fast, demand-driven, remonetisation; further tax reforms, including bringing land and real estate into the GST, reducing tax rates and stamp duties; and acting to allay anxieties about over-zealous tax administration.
These actions would allow growth to return to trend in 2017-18, possibly making it the fastest-growing major economy in the world, following a temporary dip in 2016-17.
The Economic Survey 2016-17 states that the year was also marked by some tumultuous external developments. In the short-run, world GDP growth is expected to increase because of a fiscal stimulus in the United States but there are considerable risks. These include higher oil prices, and eruption of trade tensions from sharp currency movements, especially involving the Chinese Yuan, and from geo-political factors. Another serious medium-term risk is an upsurge in protectionism that could affect India’s exports.
The Survey states that the year also saw a number of legislative accomplishments in the country. In addition to the GST, the Government overhauled the bankruptcy laws so that the “exit” problem that pervades the Indian economy--with deleterious consequences highlighted in last year’s Survey--can be addressed effectively and expeditiously.
It said that Government also codified the institutional arrangements on monetary policy with the Reserve Bank of India (RBI), to consolidate the gains from macroeconomic stability by ensuring that inflation control will be less susceptible to the whims of individuals and the caprice of governments; and solidified the legal basis for Aadhaar, to realise the long-term gains from the JAM trifecta (Jan Dhan-Aadhaar-Mobile).