INSUBCONTINENT EXCLUSIVE:
One year after India introduced a consumption tax, the results have been mixed.Hailed as one of the biggest reforms by Prime Minister
Narendra Modi, the goods-and-services levy (GST) has helped increase tax collections in a country where compliance is historically low.While
monthly receipts have picked up after a chaotic rollout, they are still not strong enough to meet the government's annual tax target
GST brought in an average 975.4 billion rupees ($14.2 billion) a month in revenue, government data reported in the three months to June
show, compared with a target of nearly 1.1 trillion rupees.India needs the revenue to keep its budget deficit in check as PM Modi prepares
to ramp up spending on welfare programs from health to farming before general elections next year
The government has already widened its deficit goal for the current fiscal year to 3.3 percent of gross domestic product from 3 percent,
putting pressure on bond yields.The budget gap may reach 3.5 percent of GDP this year as GST revenue trails, Suvodeep Rakshit and Upasna
Bhardwaj, analysts at Mumbai-based Kotak Mahindra Bank, said in a note on Monday.But there may be signs of improvement
analysts say the introduction of electronic bills for transporting goods between states has led to a rise in GST collections, giving them
confidence that the budget targets will be met
Finance Minister Piyush Goyal said on Sunday tax collections are expected to pick up during the rest of the year and the government will
likely raise 13 billion rupees from GST.Tax-to-GDP ratio touched its highest level of 11.6 percent last fiscal year, according to a report
by the Centre for Monitoring Indian Economy Pvt., a Mumbai-based business information company
This is seen rising further to 12.1 percent this year."Collections are definitely improving," said Pratik Jain, partner and national leader
for indirect tax at PwC India
"That said, it is still lower than the budget for 2018-19."Election GoodiesIntroduction of the tax last year -- with four different rates
instead of the single rate adopted in countries including the U.K
and Singapore -- led to uncertainties because of an onerous reporting system and frequent policy changes, disrupting supply chains and in
turn consumption, which acted as a drag on economic growth
Overcoming those teething problems may help lift tax collections.But the upcoming elections pose a different threat
The number of goods and services attracting the highest rate of GST were pruned before state elections last year, and with polls due in some
more states this year and for parliament in early 2019, more such tweaks can't be ruled out
That may hurt revenue.The government could move certain items currently attracting 28 percent GST to the 18 percent group, MS Mani, a
partner overseeing GST at Deloitte India said, referring to the different tax rates, also known as slabs
The government could also merge other categories in a couple of years.While introduction of GST promised predictability and stability by
replacing about a dozen federal and state levies to make India a single market, there's room for improvement."India is little far away for
moving to a single rate slab for GST compared to advanced economies such as Singapore and Australia," Mani said
"Indian conditions are diverse and it is home to poorest of poor and richest of richest making it difficult for a single rate slab in the
near future."Disclaimer: The opinions expressed within this article are the personal opinions of the author
The facts and opinions appearing in the article do not reflect the views of TheIndianSubcontinent and TheIndianSubcontinent does not assume
any responsibility or liability for the same.(Except for the headline, this story has not been edited by TheIndianSubcontinent staff and is
published from a syndicated feed.)
