Skip to main content

Sliding GST collections may put pressure on government

Sliding GST collections may put pressure on government
ST rate cut and lenient implementation of the tax reform has caused GST collection in December to slip to Rs 80,808 crore, down 14% from August and 3% from NovemberThings don’t augur well for the exchequer, with recent GST rate cuts and a lenient implementation of the goods and services tax causing collections to slide further in December, posing a challenge to the government.
Total GST collection of the central and state governments, including taxes on inter-state supplies and the cess on certain items, added up to Rs80,808 crore in December.This is a 14% drop from the collections in August, the first month of tax collection and return filing under the new indirect tax system that kicked in on 1 July.
Compared with the receipts in November, December’s GST collection was marginally lower by 3%.Lower-than-expected GST collections, along with the extra spending that Parliament approved earlier this month involving a net cash outgo of Rs33,380 crore, are set to put pressure on the government in its efforts to limit this year’s fiscal deficit to 3.2% of gross domestic product (GST), a target set in February.
In the April-October period, the fiscal deficit scaled 96.1% of the Rs5.4 trillion targeted for the full year, according to data from the Controller General of Accounts.The government has so far managed to raise about three-fourths of the targeted Rs72,000 crore through disinvestment, according to information available from the finance ministry.
Net direct tax receipts, however, grew 14.4% to Rs4.8 trillion in the April-November period from a year ago. Faster economic growth in the latter half of the current fiscal year could give fresh impetus to revenue collection.Experts attributed the decline in GST revenue to several one-off transition issues, which should fade in the coming months.
For example, many of the steps taken by the federal indirect tax body, the GST Council, to address liquidity problems faced by businesses, including liberal tax refund rules, took effect in October. By February, when tax collections for the transactions in January will be available, most of the transition issues would have faded and revenue receipts will stabilize, explained Pratik Jain, leader, indirect tax, PwC India.
On 10 November, the GST Council chaired by finance minister Arun Jaitley slashed tax rates on a large number of daily-use items, including almost 180 items in the highest slab of 28%.The Council also changed rules to make compliance easier for businesses.
These reductions alone are expected to result in a revenue loss of about Rs20,000 crore a year, according to Council members who spoke on condition of anonymity.Policy makers believe that once compliance increases and tax receipts pick up, the revenue impact of the tax cuts will only remain an academic issue.
Deloitte India senior director R. Muralidharan attributed the reduction in GST collection to rate cuts that took effect from mid-November.“It would take some time for the volumes to go up and make good the loss due to rate reduction,” he said.

The Mint, New Delhi, 27th December 2017


Popular posts from this blog

At 18%, GST Rate to be Less Taxing for Most Goods

About 70% of all goods and some consumer durables likely to cost less

A number of goods such as cosmetics, shaving creams, shampoo, toothpaste, soap, plastics, paints and some consumer durables could become cheaper under the proposed goods and services tax (GST) regime as most items are likely to be subject to the rate of 18% rather than the higher one of 28%.

India is likely to rely on the effective tax rate currently applicable on a commodity to get a fix on the GST slab, said a government official, allowing most goods to make it to the lower bracket.

For instance, if an item comes within the 12% excise slab but the effective tax is 8% due to abatement, then the latter will be considered for GST fitment.

Going by this formulation, about 70% of all goods could fall in the 18% bracket.

The GST Council has finalised a four-tier tax structure of 5%, 12%, 18% and 28% but has left room for the highest slab to be pegged at 40%. A committee of officials will work out the fitment and the council…

Firms with sales below Rs.50 crore out of ambit

The tax department has reiterated that the PoEM rules, which require foreign firms to pay taxes in India if the effective control is here, will not apply to companies withaturnover of Rs.50 crore or less inafinancial year. Last month, the tax department had come out with the longawaited Place of Effective Management (PoEM) rules, which require foreign companies in India and Indian firms with overseas subsidiaries to pay local taxes if their businesses are effectively controlled by Indians. Then the rules did not setathreshold above which they were to apply. However, the accompanying press release states that the rules will not apply to companies withaturnover of up to Rs.50 crore inayear. That created confusion whether the threshold will be adhered to. Inacircular to clarify things, the Central Board of Direct Taxes (CBDT) said the provision "shall not apply toacompany havingaturnover or gross receipts of ~50 crore or less inafinancial year".

PoEM rules essentially target shell …