New Delhi, May 20: The Goods and Services Tax regime, scheduled to get implemented across the country on July 1, has been strongly supported by the Reserve Bank of India. The two-day-long meeting of the GST Council ended in Srinagar, Jammu and Kashmir, on Friday.
The RBI in its latest report--State Finances: A Study of Budgets of 2016-17--released last week said the GST is set to usher in a new era of cooperative federalism.
"The GST is likely to set a new course for cooperative federalism in India by strengthening Centre-State partnership," the RBI said its report.
The introduction of GST will have economy-wide ramifications and holds the "best bet" for state governments to improve their finances without cutting productive expenditure, the RBI added.
Referring to the challenges, it said the GST implementation should be addressed through a robust dispute resolution mechanism and the Goods and Services Tax Network is expected to provide the necessary information technology infrastructure to all stakeholders.
The GSTN is the IT backbone of the country's largest tax reform which is scheduled to be rolled out from July 1.
"The GST remains the best bet for state governments in returning to the path of fiscal consolidation without compression of productive expenditure," it said.
It further said that from a medium term perspective, debt sustainability of states is likely to be the key factor in shaping the evolving contours their finances.
As per the RBI, greater devolution of resources through statutory transfers would provide states with the flexibility to prioritise their expenditure in sync with their development objectives.