Equirus Securities outlines a 20-step roadmap urging fuel GST and bond tax parity to unlock India's $20T economy.
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“Tax Reforms Key to $20T India Economy: Equirus”
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Tax Reforms Key to $20T India Economy: Equirus
MUMBAI — Sweeping tax rationalization across energy and capital markets is imperative to unlocking liquidity, reducing corporate borrowing expenses, and deepening domestic financial systems, according to a report released by Equirus Securities on Sunday.
The institutional research report, titled “India’s Road to a $20 Trillion Economy,” outlines a strategic 20-step framework designed to accelerate national output toward the $20 trillion threshold by 2036. The equity research firm contends that structural adjustments to fuel taxation, investment withholding taxes, and debt market parity are critical levers to enhance capital allocation and elevate long-term gross domestic product (GDP) expansion.
Fuel Rationalization under GST Framework
A core recommendation of the Equirus framework focuses on incorporating petroleum products into the unified Goods and Services Tax (GST) structure at an estimated 18% standard rate.
Currently, non-integrated fuel levies inflate freight overheads. Equirus projects that integrating fuel into the GST chain would unlock approximately ₹5.5 lakh crore in capital liquidity across supply chains. This structural transition could reduce national logistics costs from roughly 9% down to 7% of non-services GDP, potentially adding 0.3 to 0.4 percentage points to annual GDP growth and yielding up to $60 billion in incremental export gains. However, analysts note the reform would require fiscal adjustments to offset an estimated net central excise revenue gap of nearly ₹1.6 lakh crore annually.
Capital Market Parity and Corporate Bond Expansion
The report highlights a structural imbalance in India’s financial architecture, noting that the domestic corporate bond market stands at approximately 18% of GDP, compared to 130% for equity market capitalization.
To correct this asymmetry, Equirus advocates aligning the tax treatment of debt securities closer to equity instruments. According to economic modeling within the report, expanding India’s bond market depth toward benchmark peer levels—such as China’s—could generate approximately ₹54 lakh crore in additional institutional financing capacity.
Furthermore, lowering average corporate borrowing costs through deeper credit markets could deliver direct interest savings of nearly ₹2.2 lakh crore annually (0.63% of GDP), creating an economic multiplier effect capable of boosting baseline growth by an additional 0.9 to 1.3 percentage points.
Withholding Tax Streamlining
To optimize liquidity for retail and institutional investors, the brokerage proposes simplifying Tax Deducted at Source (TDS) rates on investment income to a standardized 5% flat rate, with residual tax obligations settled during annual income tax returns.
Equirus estimates that streamlining withholding mechanisms would prevent unnecessary capital lock-ups, releasing approximately ₹13.4 lakh crore of working capital directly back into secondary market operations and economic circulation.
