THE Asian Development Bank (ADB) perceives India's corporation tax cuts as investment and growth booster. According to Asian Development Outlook 2019 Update issued on Sep 25, "the latest corporate tax cuts, announced on Sep 20, are a large fiscal stimulus equal to 0.7% of GDP. The average effective corporate tax rate including all surcharges will fall from 30% to 25% and, for new manufacturing companies, to 17%. This will place India among the emerging economies with the lowest corporate tax rates, promising to boost investment and growth and make India more competitive internationally".

The Update believes that tax revenue growth is expected to remain sluggish on account of only modest growth in collections of Income tax and GST. It states: "The target for personal income tax collection is nonetheless ambitious and may be difficult to achieve with a GDP growth slowdown, despite government efforts to widen and deepen the tax net and impose higher taxes on individuals with high net worth. Lower forecast GST collection has been offset by raising excise duty and taxes on petroleum products. Nontax revenue has been budgeted higher on larger dividends and profits from public enterprises, including the central bank, and higher proceeds from disinvestment". It hopes policy action to ensure the fast-tracking of GST refunds should provide an important boost to small and medium-sized firms that have been constrained by a crunch on working capital.

Collection of GST increased by only 6.4% in the first 5 months of FY2019, implying continued implementation issues. Non-tax revenue received a boost as the central bank transferred to the government a record $25billion, equal to 0.9% of GDP and well above the budgeted 0.7% of GDP. In addition to a dividend that is transferred every year, the central bank transferred part of its excess capital, in line with a recommendation from an expert committee.

The Report has revised downward India's projected growth in GDP to 6.5% from earlier forecast of 7% for 2019-20.