After almost two years of GST, the collection under the new indirect tax regime has started to pick up. The GST system was implemented in July 2017 and it has started to stabilize after 21 months of implementation and continuous changes based on feedback from businesses. The collections jumped by one tenth in April to reach 1.13 lakh crore rupees compared to the same month in the previous year. The collections grew despite the rationalization to benefit the middle class in December when Monitors and Television screens, Tyres, Power banks of lithium-ion batteries have been brought within the 18 percent tax slab from the earlier 28 percent slab. Since the implementation of the indirect tax regime on July 1, the council has rationalized rates 5 times (October 6, November 10, January 18 and July 21 and December 22).
As usual IGST (Integrated GST) was the highest contributor in total collection with 54,733 crore rupees which is almost 50 percent. SGST (State GST) contributed 28,801 crore rupees and central GST was lowest contributor with 21,163 crore rupees. The center and state government share was 47,533 crore and 50,776 crore rupees respectively after the division of IGST. The center’s target for GST collection is 6.1 lakh crore rupees which is achievable if collection goes at this rate. The cess collection which is used to compensate for revenue losing states was 9,168 crore rupees.
“The April collection indicates the tax base is increasing gradually, with GST getting stabilised with measures such as e-way bills and effective data mining. Perhaps one reason for this increase was also a push from businesses to their vendors for reporting sales of 2017-18, for which the last date of claiming credit coincides with GST filings for the month of March,”said Pratik Jain, partner at consultancy PwC India.
The industry experts lauded the increasing tax collection and called it healthy for the Indian economy. “The increase in GST collection, despite rate rationalization, is a welcome upshot for Indian economy. The major reason could be reconciliation of returns and ledgers at the end of financial year 2018-19,” said Vishal Raheja, deputy general manager, Taxmann.
GST has also been helpful in consolidating the direct taxpayer base because GST tracks business turnover. Thus, it has created an incentive for the GSTN to collect data about the income of the business owners. Recently, Finance Minister ArunJaitley mentioned in a Facebook post that “The implementation of GST as a single consolidated tax has had a significant impact even on direct taxes. Those who have disclosed a business turnover for the GST now find it difficult not to disclose their net income for the purposes of income tax. Last year, the impact of GST on direct tax collection was not visible. Since GST had been imposed in the middle of the year, it will be more apparent this year. The first big news for this year is that the advance tax deposit during the first quarter of this year has seen a gross increase of 44% in the personal income tax category and 17% in the corporate tax category.”
In the transition of a nation from being a developing to a developed one, it has to increase its citizens’ tax compliance. If ‘Tax to GDP’ ratio is low, a country cannot afford to provide basic amenities like health and education to its citizens. Universal access to these primary needs is required to build human capital and improve the standard of living. India has introduced a near Universal Health care which goes by the name ‘Ayushman Bharat’ i.e National Health Protection Scheme (Popularly known as “Modicare”). The increased ‘tax to GDP ratio’ means that more money will now directly go into government coffers. This money can be utilized in making India, a welfare state of the kind, Deen Dayal Upadhyay dreamt of.