As the fiscal year draws to a close, it is worth examining how the government’s indirect tax collections have panned out this year, given that it was the year of the introduction of the goods and services tax (GST). What emerges from the data on GST collection, released on Tuesday, is that the well-known disruptions that accompanied the roll-out of the GST were taken into account by the government in the Budget-making exercise. When the state GST is taken out of the equation, the Union Budget for 2018-19 estimated that Rs 4.4 trillion would be collected in 2017-18. Now that the figures for February are in, it is clear that this figure has been met and perhaps exceeded slightly, especially if the Budget numbers are adjusted for compensation that has to be paid to states during the transition period. While the February numbers for tax collection showed the second consecutive decline, the fact remains that the roll-out does not appear to have compromised the Union government’s revenue and thus has been successful to that extent.
Some other facts need to be noted. First, there has been a trend of taxpayers missing deadlines for payment, which has meant final collections for any given month can be higher than first estimated. The government has worked on making the GST easier to pay by upgrading the GST Network and this is likely to improve collections further. The Centre’s revenues seem to be particularly protected, given the consistently high levels of “unallocated” integrated GST being recorded, which adds to the Centre’s kitty. Questions regarding improvements in compliance are also receiving provisional and optimistic answers. About 69 per cent of tax assessees filed returns in both January and February. This is before in-built compliance methods such as the e-way bill are brought into force. Thus, there is every reason to hope that this level of compliance will increase.
It is true that there has been, as yet, no great bump to government revenue collection through the GST. Imperfections in the design of the tax and attempts to keep subsistence items out of the tax net will naturally have meant that overall revenue is less than what would have been expected. This has, however, also meant that the tax has been less inflationary in the short run than what was originally expected. Further fine-tuning of the GST should be expected in coming months; it has been proposed, for example, that those assessees who have a zero tax bill could file returns every six months.
Overall, therefore, the government deserves credit for its fairly conservative estimates in the Budget for indirect tax revenue. Judged by those careful benchmarks, the roll-out has been a success in terms of preserving tax revenue. This is also unambiguously good news from the point of view of the next financial year’s fiscal mathematics as embedded in the Union Budget; the Centre’s GST receipts of Rs 7.4 trillion for 2018-19 look quite achievable now. The focus of the Union finance ministry and the GST Council must be on introducing methods to increase compliance and on making it easier to pay, especially for small businesses.