Implementation of the long-pending Goods and Services Tax (GST) will be a a key milestone for the economic reform process as it would improve tax administration and increase the resource raising potentials of the state governments, the survey said. Tax reform would also be critical for improving the ease of doing business and promoting efficiency and productivity growth.
“The introduction of GST will have a significant bearing on the resource-raising potential of state governments, besides being an important tax reform measure,” the survey said.
Replacing all existing indirect taxes, the GST will create a national market, besides eliminating cascading taxes and aligning taxation of imports and exports correctly. The move will also improve competitiveness of production and exports from India.
The implementation of a Central GST (CenGST) could be the first step towards implementation of the GST, the survey added.
“CII strongly advocates early implementation of GST, which would increase GDP growth by about 1.5% and hopes that the suggestion in the survey on a single-rate GST would be fast- tracked,” said Ajay S Shriram, president, CII.
The Direct Tax Code (DTC) would also be critical for a clean modern replacement of the existing laws.
“Just as GST is a transformation of indirect taxes, DTC is required as a clean modern replacement for the existing income tax law,” the survey said.
Last week, finance minister Arun Jaitley held a meeting with the Empowered Group of State Finance Ministers to discuss the issues related to its implementation while attempting to iron out differences between the Centre and states.
Issue related to compensation to states and the demand to keep petroleum products and entry tax out of the purview of GST need to be sorted out. However the minister said he was hopeful of an early solution to the issue.
Full coverage: Union Budget 2014