Mumbai, August 16: A recent report emphasizes the necessity for significant tax reforms in India to strengthen capital markets, enhance access to the bond market, and reduce financial costs. The findings were released on Sunday.
In its report titled “India’s Road to a $20 Trillion Economy,” Equirus Securities suggests rationalizing taxes on fuel, income from investments, corporate bonds, and the equity market. The report argues that such measures could improve capital allocation, reduce compliance burdens, and foster rapid economic growth.
The report recommends including fuel under the Goods and Services Tax (GST), stating that this could lower logistics costs and enhance the competitiveness of Indian businesses.
According to Equirus, imposing an 18% GST on fuel could generate an additional ₹5.5 lakh crore for the economy.
The brokerage estimates that this move could reduce logistics costs from approximately 9% to 7% of non-services GDP and increase the annual economic growth rate by 0.3-0.4 percentage points.
It also predicts an export benefit of around $60 billion, although this could lead to an annual loss of approximately ₹1.6 lakh crore in net central excise revenue.
Equirus advocates for aligning tax rules on bonds and equities to promote the growth of the corporate bond market.
The report notes that India’s corporate bond market currently represents about 18% of GDP, while the equity market stands at 130% of GDP.
If the bond market develops to match China’s level, an additional financing capacity of approximately ₹54 lakh crore could be created.
Lower borrowing costs could result in direct savings of around ₹2.2 lakh crore annually for borrowers, equating to 0.63% of GDP before the multiplier effect.
Equirus estimates that the economic multiplier effect could increase growth by 0.9-1.3 percentage points.
The brokerage also proposed reducing the Tax Deducted at Source (TDS) on investment income to a flat 5%, with the remaining taxes payable when filing tax returns.
Equirus predicts that this change could bring back approximately ₹13.4 lakh crore in working capital to the financial market.
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ABS
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