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A reform window: On the GST trajectory
Context:
Recent financial data reveals robust growth in revenue collections for the financial year 2023-24, with significant increases in both net direct tax collections and Goods and Services Tax (GST) revenues.
Strong Revenue Performance:
- Direct Tax and GST Collections: Net direct tax collections surged by 19.9% by mid-March, reaching 97% of the revised Budget targets for the financial year.
- GST revenues stood at a robust Rs20.18 lakh crore, with gross GST revenues in March crossing Rs1.78 lakh crore, marking the second highest tally since the rollout of GST six and a half years ago.
- Average monthly collections in 2023-24 have grown by 11.6% to over Rs1.68 lakh crore, setting a new revenue normalcy for the coming fiscal year.
Factors Driving Revenue Growth:
- Tax evasion: Increased collections may partly result from tax demands raised for past years and intensified efforts to curb tax evasion, particularly through measures targeting fake invoices and fraudulent input tax credits.
- Growth in net GST revenues and rising gross collections from domestic transactions indicate heightened economic activity in the last quarter of 2023-24.
- Reform: The strong revenue trajectory offers the government an opportunity to focus on essential reforms to the tax system, including rationalizing multiple GST rates, expanding its scope to include excluded items like electricity and petroleum products, and reducing high levies on key products such as cement and insurance.
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