Has Tax Collection Increased or Decreased after GST Implementation?
Introduction
The introduction of the Goods and Services Tax (GST) in India two years ago marked a significant milestone in the country's fiscal journey. The GST regulatory framework, hailed as the single-biggest tax reform, was rolled out with a comprehensive overhaul of the existing indirect tax structure.
India's tax collection has seen notable fluctuations, resuming a trend of upward growth in November 2019. With festive shopping and improved compliance, the collections rose to 6 billion Indian Rupees (Rs 1.03 lakh crore), signaling a reversal from the previous two months of decline. This article delves into the impacts and outcomes of GST on tax collections in India over the past two years.
Impact of GST on Tax Collections
GST collections in the fiscal year 2017-18 were marked by a healthy increase. For instance, the collections in November 2018 reached Rs 97,637 crore, while in the following month, they stood at Rs 95,380 crore. These figures reveal a gradual uptick in tax revenues after the implementation of GST.
Aggregate Growth and Reassessments
Concluding that tax collection increased, it's essential to consider the broader picture. Since the inception of GST, the average monthly revenue collection reached Rs 89,700 crore in the fiscal year 2017-18. This figure surged to Rs 97,100 crore in 2018-19, further propelled by the festive season's shopping sprees and better compliance from businesses.
Government's Revenue Base Expands
The GST has not only enhanced the tax collection mechanism but also broadened the revenue base. The number of taxpayers under the GST regime has seen a significant hike, increasing by approximately 85% over the past two years. The assessees or taxpayers' count rose from around 6.5 million to over 12 million. This expansion in the assessees base translates to a more substantial revenue base for the government.
Challenges and Missed Targets
Despite the positive trends, the GST implementation hasn't been without its challenges. For instance, in the 2018-19 budget, the government estimated the GST collection at Rs 7.4 lakh crore, which was later revised to Rs 6.4 lakh crore in the 2019-20 interim budget. However, the actual collection fell short, standing at around Rs 5.8 lakh crore, a significant shortfall compared to the budgeted amount. This disparity highlights the need for ongoing improvements and adjustments in tax collection policies.
Complexity and Multiple Tax Slabs
A notable drawback of the GST system is the presence of multiple tax slabs. The International Monetary Fund (IMF) had advised the government to simplify the GST structure to improve business and financial processes. Fundamentally, one of the issues arises from the multitude of GST rates, which can detract from the ease of compliance and efficiency. The government has been aware of these complexities, evidenced by the massive 35 meetings of the GST council, which made 90 amendments to the GST rules.
Stable Performance vs. Expected Targets
While monthly average GST collections saw a 10% decrease in April and May 2019 compared to the previous year's figures, this decline underscores the challenges faced in achieving target levels. Rahul Gandhi, the Congress president, aptly dubbed the new tax regime as the 'Gabbar Singh Tax' for the tax troubles faced by businesses. However, it is essential to see the bigger picture: over 20 states reported more than a 14% increase in revenues without needing the compensation fund, a significant indicator of the positive impacts of GST.
Future Outlook and Reforms
Looking ahead, the government's approach to the GST is optimistic yet practical. In his joint address to Parliament, President Ram Nath Kovind emphasized simplifying the GST system in the current fiscal year. The government is considering a potential reduction in the number of tax slabs, possibly categorizing them into three broader categories. However, Arun Jaitley, former Union Finance Minister, highlighted the importance of a gradual approach to minimize revenue losses. Other reforms include the introduction of a new GST return filing system, which will allow businesses to file returns in a single format monthly, reducing complexity.
Contact for Further Assistance
For any assistance or services related to tax matters, please contact:
Adv. Vishal Yadav
Income Tax Corporate Lawyer
Lex Baselious Law Chambers
lexbaselious@
91 9506682924