GST likely to boost SME sector

The macroeconomic impact of introduction of the Goods and Service Tax (GST) could turn out to be significant in the years ahead, the Reserve Bank of India (RBI) recently said in its report titled 'State Finances: A study of Budgets of 2016-17'.

It said that GST implementation is likely to boost the small and medium scale enterprises (SME) sector by (i) improving their ease of doing business; (ii) lowering logistical costs; (iii) extending outreach beyond state borders; and (iv) aiding SMEs dealing in sales and services. 

Furthermore, economic activity would also benefit from exports becoming more competitive as the GST regime will eliminate the cascading impact of taxes, it added.

The report clarifies that besides giving a major boost to tax revenue, the larger impact on the fiscal health would be from reduction in the administrative compliance cost. GST is likely to be supportive of fiscal consolidation without compromising capital expenditure. 

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