According to an IMF release issued at the end of its bilateral for 2014 Article IV Consultation with Indian authorities, IMF's Executive Board suggested that "fiscal space for higher growth-enhancing capital spending and social expenditures could be obtained by further rationalizing fuel, fertilizer, and food subsidies; and raising tax revenues to pre-global financial crisis levels, in particular by introducing a well-designed goods and services tax and enhancing tax administration."

The release says: "Directors commended the government's commitment to strengthening the fiscal position further, and welcomed recent reforms, including the deregulation of diesel prices. They supported the authorities' medium-term fiscal targets and encouraged the authorities to articulate and implement specific supporting measures, which could be used also to enhance the quality and sustainability of fiscal consolidation."

IMF's Staff Report on India prepared for 2014 Article IV Consultation, issued along with the release, lists a slew of key policy recommendations. One such key initiative says: "The quality of the consolidation should be improved, underpinned by comprehensive tax reform (such as introducing the goods and services tax (GST) and improving tax administration) and measures to further reduce subsidies."

It has implicitly called for improvement in the design of GST which is yet to be finalized. As put by the Report, "The GST design being contemplated is also fairly complex, with a dual administration arrangement that involves the tax authorities of both the center and the states separately taxing a single transaction. Issues that will require further work include crediting across interstate borders, settlement of revenue sharing, and building capacity in states to tax services."

It notes that a well-functioning GST will enhance tax compliance, and over time, following the creation of a single market, boost growth, perhaps by as much as 1–1½ percent of GDP.

However, in the near term, the GST may not add substantially to revenue, as it would replace a number of central and state level indirect taxes. Further, the central Government is expected to guarantee compensation-for a limited time-to state Governments which lose revenue.

An important disclosure made in the report is the Finance Ministry's reluctance to merge Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC). The merger has been recommended by Tax Administration Reform Commission (TARC), which submitted four reports with the last one in February 29015.

The IMF Staff Report says: "The authorities disagreed with staff on the desirability of merging direct and indirect tax boards, arguing that functional specialization remains necessary."

It adds: "The authorities concurred with staff that enhanced revenue mobilization is a priority over the medium term . Once implemented, they expect that the GST will gradually boost revenue indirectly not only by promoting faster economic growth, but also by helping move economic activity to the formal sector, thereby expanding the tax base and improving compliance. The authorities noted staff's proposal on enhancing fiscal responsibility, and considered that, perhaps in the context of discussions surrounding a renewed fiscal rule, some flexibility regarding the fiscal deficit target could be introduced."