New Delhi: Giving a thumbs up to GST, Moody’s on Sunday said that it will be positive for India’s rating as it will lead to higher GDP growth and increased tax revenues.
Moody’s positive reaction on GST will come as a short in the arm of government as there are concerns that initial teething problem will impact economic growth in short term. It is feared that as traders and manufacturer try to come to terms with GST rules, trade and manufacturing in the country may get hit in the short term.
“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,” Moody’s VP (sovereign risk group) William Foster said.
The agency said that GST will also support higher government revenue generation through improved tax compliance and administration. “Both will be positive for India’s credit profile, which is constrained by a relatively low revenue base,” Mr Foster said.
“We expect the net impact of GST on government revenues to be positive,” he added. Moody’s has a ‘Baa3’ rating on India with a positive outlook. Meanwhile, industry body CII said that going forward, GST will contribute to ease of doing business and accelerate new business ventures.
“GST imparts significant competitiveness to Indian industry, thereby boosting the inherent potential of the economy to raise incomes, add to the formal economy and incentivise exports. GST also helps expand the tax net. Above all, it gives us tremendous confidence that the government will continue to facilitate investments and simplify the business environment,” said Shobana Kamineni, president, Confederation of Indian Industry.
She said that GST is based on self-compliance with the input tax credit as incentive to businesses to step into the tax fold.
