Goods and services tax (GST) revenues reached a new record of ?1.68 lakh crore in April as technology-aided compliance improved alongside higher economic activity, with residual pandemic restrictions being lifted. The takings are 18% higher than the collection of ?1.42 lakh crore in March, and 20% more than the ?1.39 lakh crore of April 2021. Improvements in the administration of the tax and ease of compliance are lifting the trend rate of collection beyond the average of recent months – even though the GST is saddled with multiple rates that make it suboptimal from a revenue standpoint.
The progressive introduction of the e-invoice to lower turnover thresholds has reduced the scope for under-reporting of tax liabilities or over-reporting tax credit. Tighter rules for availing input tax credit (ITC) have shifted part of the tax administration burden to buyers, shaking out non-compliant vendors from supply chains. These are permanent effects that get baked into a value-added tax system a few years after its rollout. India’s GST has entered that zone, and the revenue buoyancy is likely to sustain as more economic activity is brought under the purview of the self-policing tax. Further improvements in collection will result from reversing the cut in the weighted average GST rate from 14.4% at the time of launch in 2017 to about 11.6% in 2019. The expected buoyancy did not materialise till the economy emerged from Covid pandemic restrictions.
Administrative improvements have harmonised tax collection between the Centre and states. Assisted by data analytics, frontline states reported revenue growth rates well above 20% in April. These rates of growth are far ahead of the underlying economic activity and essentially serve as markers for administrative efficiencies. Despite these gains, GST revenue as a share of consumption has not yet caught up with the share of the taxes it had subsumed in 2017. But there has been substantial progress, given the divergence between the current effective GST rate from the revenue-neutral one.
Source-https://economictimes.indiatimes.com/opinion/et-editorial/good-cheer-for-goods-and-services-tax/articleshow/91269766.cms