The International Monetary Fund has hailed Modi government’s GST regulation as a ‘milestone reform’ crediting it for unifying and harmonising the tax regime in the country, PTI has reported.
Ranil Salgado, IMF mission chief for India applauded the GST regulation for creating a unified 1.3-billion strong national market for the first time in the country’s history by lowering internal barriers to trade thereby ‘effectively establishing a free trade agreement’.
Salgado further added that the regulation will lead to more economic activity in the formal sector leading to more reliable and better quality jobs in the country.
“As a result, the goods and services tax should improve productivity and boost medium term potential growth, while also creating room for the government to increase much needed social and infrastructure spending,” he said.
The IMF however, said that a dual rate regime with a low standard rate across categories with a higher tax on select goods can help increase compliance and productivity.
“Yet, the GST has a complex structure with a relatively high number of rates (and exemptions), which could be simplified without sacrificing progressivity of the current GST and with potentially significant gains from lower compliance and administrative costs,” the IMF report read.
The report states that India is among the only five countries in the world with a GST regime consisting of four or more tax slabs.
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