India could gain $15 billion a year by implementing the Goods and Service Tax (GST) as it would boost exports, raise employment and spur growth, the head of a government panel said on Monday.
Finance Minister Pranab Mukherjee is expected to lay a roadmap for the launch of the ambitious tax reform in his budget speech next Monday. It is expected to be implemented across the country from April, 2010.
The new tax system, which will replace all major central and state taxes, is expected to lower tax rates by broadening the tax base and minimise exemptions, Vijay Kelkar, Chairman, of the 13th Finance Commission said.
Kelkar said implementation of GST had raised Canada's GDP by 1.4 percent and would help India redistribute the tax burden equitably between manufacturing and services.
"In India we can expect a similar kind of positive impact. This means gains of about $15 billion annually," he was quoted as saying in speech, a copy of which was made available by the finance ministry.
The panel, which has been set up to determine the devolution of federal taxes to states for five years, is expected to submit its report soon.
Referring to opposition to GST by some state governments, Kelkar said the panel could provide a compensation package to states and help speed up the implementation of a "flawless" GST.
Kelkar said railways, construction and real estate activities need to be brought under the GST as it would generate extra revenue for the government.