HIGHLIGHTS OF GST: ECONOMIC SURVEY 2017-18
The Indian Economy has seen some major reforms in the past couple of years and with the recent emergence of Goods and Services Tax (GST) the trend seems to revolutionize and sweep India’s taxation system. The major aim of demonetization and the Goods and Services Tax (GST) was to increase the formalization of the economy and bring more Indians into the Income Tax net. Recent experience with the GST has shown that vertical cooperation between the Centre and States i.e. Cooperative Federalism has brought transformational economic policy changes.
The Economic Survey 2017-18 highlights a whole new world has opened up due to the information repository under Goods and Service Tax (GST) widely heralded for many things, especially its potential to create one Indian market, expand the tax base, and foster cooperative federalism. The Economic Survey highlights India’s lowest share of direct taxes among developed and developing countries. Unlike in other countries India’s reliance on direct taxes seems to be declining but due to the implementation of GST, this trend seems to be intensified if the Goods and Services Tax (GST) proves to be a buoyant source of revenue.
The Economic Survey also highlights that robust GST revenue collections in early days of its implementation would impact increased personal income tax collections substantially from about 2 percent of GDP between 2013-14 and 2015-16, likely to rise to 2.3 percent of GDP in 2017-18, a historic high.
Following are the important highlights with respect to the GST under Economic Survey 2017-18:
1. The GST has been widely heralded for many things, especially it will create a vast repository of information, which will enlarge and surely alter our understanding of India’s economy.
2. A preliminary analysis of the GST data states that as on December 2017, there were 9.8 million unique GST registrants slightly more than the total Indirect Tax registrants under the old system.
3. Economic Survey stresses that there has been 50% increase in the number of indirect taxpayers, beside large increase in voluntary registrations, especially by small enterprises that buy from large enterprises and want to avail themselves of Input Tax Credits (ITC).
4. One of the many benefits of the GST was the voluntary compliance it would elicit. A few numbers highlight this phenomenon. There are about 1.7 million registrants who were below the threshold limit (and hence not obliged to register) who nevertheless chose to do so.
5. The Economic Survey states that due to the repository of information under GST, it is now possible to find out the state wise distribution of international exports of goods and services. The data shows that prosperity of a state is related to its export performance. Five states which account for 70% of India’s exports are Maharashtra, Gujarat, Karnataka, Tamil Nadu, and Telangana.
6. The Economic Survey also showcases that out of 71 million non-agriculture enterprises; approx. 13% are registered in GST. The greatest number of the GST registrants is from Maharashtra, UP, Tamil Nadu and Gujarat.
7. Uttar Pradesh and West Bengal have seen large increase in the number of tax registrants compared to the old tax regime. The Economic Survey also states that the bulk of transactions are business-to- business (B2B) and exports which accounts for 30-34%.
8. Due to the GST data the extent of formality/informality of the Indian economy can be understand. Since the new data is now available in GST, one can define tax formality by having firms registered under the GST. The digitization of government data and the introduction of the GST have provided an opportunity to make some preliminary estimates of formal employment.
CONCLUSION:
The government will need to stabilize GST implementation to remove myriad uncertainty especially in the informal sector affecting supply chains, such as small traders who found it difficult to comply with the paperwork demands and suppliers of intermediates to larger manufacturing companies. The Economic Survey concludes on a positive note saying that in the initial phase of such a large disruptive change, GST performance is noteworthy. The GST promises to be a buoyant source of future revenues.