Finance Minister Nirmala Sitharaman had said earlier this year that the GST (goods and services tax) regime has brought a significant improvement in the system which has not only benefited the states but ultimately the “people as well”.
One may argue that the current weighted average tax rate under GST is, which is lower than the revenue neutral rate of 15%, has led to lower tax collections, primarily affecting state tax revenues. But a sustained buoyancy in the GST mop-up, coupled with an increasing tax base, and easing compliance costs has nonetheless aided both Centre and states revenue collections, and provided cushion to fiscal slippage – which experts say would continue to some extent in the coming year as well.
A review of GST slabs with simplification as a key objective will likely happen once a new government takes over after the Lok Sabha elections. The recast should however must aim at expanding the tax base and improving tax credit flows, rather than a wholesale hikes in rates that could hit consumption, analysts believe. The list of items exempt from tax may be pruned in the review.
An RBI study in 2022 had said that the weighted average GST rate fell from 14.4% at the time of inception to 11.6% in 2019 as a consequence of a series of tax cuts between November 2017 and December 2018. For perspective, the Arvind Subramanian Committee report had estimated the revenue neutral rate at 15-15.5%.
In the first eight months of the current fiscal year, gross GST collections have recorded a growth of 12% year-on-year, with a monthly average mop-up of Rs 1.66 trillion. In FY23, the monthly average collections were Rs 1.50 trillion, and in FY22, they were Rs 1.24 trillion.
Among the components of gross collections – Central GST (CGST) collections have recorded a sharp 16.7% jump in collections in April-November FY24, and State GST (SGST) collections have witnessed a 15.4% rise.
Read more at: FINANCIAL EXPRESS
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