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Moving to Goods and Services Tax in India: Impact on India’s Growth and International Trade

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  • Rajesh Chadha

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Abstract

The differential multiple tax regime across sectors of production leads to distortions in allocation of resources thus introducing inefficiencies in the sectors of domestic production. With regard to India’s exports, this leads to lack of international competitiveness of the sectors which would have been relatively efficient under distortion- free indirect tax regime. Further, there is lack of full offsets of taxes loaded on to the fob export prices. Efficient allocation of productive resources and providing full tax offsets is expected to result in gains for GDP, returns to the factors of production and exports of the economy. Implementation of a comprehensive goods and services tax (GST) is expected, ceteris paribus, to provide gains in India’s GDP somewhere within a range of 0.9 to 1.7 per cent. It is expected that the real returns to the factors of production would go up. [Working Paper No. 103]

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  • Rajesh Chadha, 2010. "Moving to Goods and Services Tax in India: Impact on India’s Growth and International Trade," Working Papers id:2764, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:2764
    Note: Institutional Papers
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    References listed on IDEAS

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    1. Bird, Richard M. & Mintz, Jack M. & Wilson, Thomas A., 2006. "Coordinating Federal and Provincial Sales Taxes: Lessons From the Canadian Experience," National Tax Journal, National Tax Association, vol. 59(4), pages 889-903, December.
    2. Brown, Drusilla K. & Deardorff, Alan V. & Stern, Robert M., 1996. "Computational Analysis of the Economic Effects of an East Asian Preferential Trading Bloc," Journal of the Japanese and International Economies, Elsevier, vol. 10(1), pages 37-70, March.
    3. Richard M. Bird & Michael Smart, 2008. "The Impact on Investment of Replacing a Retail Sales Tax by a Value-Added Tax: Evidence from Canadian Experience," Working Papers Series 15, Rotman Institute for International Business, Joseph L. Rotman School of Management, University of Toronto, revised Jun 2008.
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    Keywords

    multiple tax regime; production; allocation; inefficiencies; international competitiveness; GDP;

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