{"id":114287,"date":"2021-06-23T12:22:25","date_gmt":"2021-06-23T06:52:25","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=114287"},"modified":"2021-06-23T12:22:25","modified_gmt":"2021-06-23T06:52:25","slug":"gst-a-turning-point","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/gst-a-turning-point\/","title":{"rendered":"GST: A turning point?"},"content":{"rendered":"\n<h5><b><span data-contrast=\"auto\">How to improve Tax to GDP ratio\u00a0with GST?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/h5>\n<p><b><span data-contrast=\"auto\">Context<\/span><\/b><span data-contrast=\"auto\">:<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">For the last 25 years, our tax-to-GDP ratio has been stuck at between 16 and 17 per cent. This is\u00a0severely constraining our fiscal\u00a0capacity\u00a0to devote more resources to our underinvested sectors such as education and health.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">How to improve tax to GDP\u00a0ratio\u00a0with GST?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"82\" aria-setsize=\"-1\" data-aria-posinset=\"193\" data-aria-level=\"1\"><span data-contrast=\"auto\">The goods and services tax (GST) reforms offer the prospect of raising the tax-to-GDP ratio by at least 2 percentage points if we\u00a0<\/span><b><span data-contrast=\"auto\">improve the information technology platform\u00a0and\u00a0address the issues of raising the incidence of duties<\/span><\/b><span data-contrast=\"auto\">.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<h5><b><span data-contrast=\"auto\">What\u00a0are\u00a0the reasons\u00a0for Higher GST Revenues?<\/span><\/b><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559685&quot;:720,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/h5>\n<p><span data-contrast=\"auto\">The\u00a0<\/span><b><span data-contrast=\"auto\">recent upsurge in\u00a0GST\u00a0revenue\u00a0is<\/span><\/b><span data-contrast=\"auto\">\u00a0due to\u00a0the following,<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"82\" aria-setsize=\"-1\" data-aria-posinset=\"194\" data-aria-level=\"1\"><span data-contrast=\"none\">Better compliance prodded by the matching of\u00a0invoices\u00a0<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"82\" aria-setsize=\"-1\" data-aria-posinset=\"195\" data-aria-level=\"1\"><span data-contrast=\"none\">Better monitoring of permissions granted for registrations through physical verification of the premises\u00a0<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"82\" aria-setsize=\"-1\" data-aria-posinset=\"196\" data-aria-level=\"1\"><span data-contrast=\"none\">Evaluation of the past income tax payment record.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"82\" aria-setsize=\"-1\" data-aria-posinset=\"197\" data-aria-level=\"1\"><span data-contrast=\"none\">All\u00a0this has reduced the volume of fake input invoices.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"82\" aria-setsize=\"-1\" data-aria-posinset=\"198\" data-aria-level=\"1\"><span data-contrast=\"none\">Better coordination between the two tax departments \u2014 Central Board of Direct Taxes and Central Board of Indirect Taxes and Customs \u2013 has helped boost collections.\u00a0This has led to smaller units covering the unincorporated and the family units to pay greater amount of taxes.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<h5><b><span data-contrast=\"auto\">What are the changes required\u00a0in the GST\u00a0to improve tax to GDP ratio?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/h5>\n<p><span data-contrast=\"auto\">The Fifteenth Finance Commission in its report based on an IMF study has said that the GST incidence of duty has fallen from 14 per cent to 11.8 per cent.\u00a0This needs to be corrected. There are\u00a0a number of\u00a0steps that need to be taken.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ol>\n<li data-leveltext=\"%1.\" data-font=\"Calibri\" data-listid=\"86\" aria-setsize=\"-1\" data-aria-posinset=\"1\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">Large number\u00a0of exemptions need to be phased away<\/span><\/b><span data-contrast=\"auto\">:\u00a0The government\u00a0need to restrict GST exemptions only to those items that were\u00a0VAT (Value Added Tax)\u00a0exempt in the pre-GST period.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><span data-contrast=\"auto\">There is also a need to\u00a0<\/span><b><span data-contrast=\"auto\">revisit the GST rates on tobacco and gold<\/span><\/b><span data-contrast=\"auto\">:\u00a0<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span>\n<ul style=\"list-style-type: disc;\">\n<li><span data-contrast=\"auto\">India\u00a0need to raise the GST rates on tobacco, which is levied on reverse charge basis, from the present level of 5 per cent.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><span data-contrast=\"auto\">Similarly,\u00a0on\u00a0gold, there is a need to revise the GST rate of 3 per cent on equity consideration. As more than 80 per cent of gold and gold ornaments\u00a0purchased\u00a0and owned is by the top decile of the population.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li><span data-contrast=\"auto\">There\u00a0is also the need to\u00a0<\/span><b><span data-contrast=\"auto\">deal with the problem of inverted duty structure\u00a0<\/span><\/b><span data-contrast=\"auto\">in sectors such as textiles and footwear.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li><span data-contrast=\"auto\">Finally, the\u00a0<\/span><b><span data-contrast=\"auto\">real estate sector also needs to be brought under the\u00a0ambit\u00a0of GST<\/span><\/b><span data-contrast=\"auto\">.\u00a0This will clean up the land market and increase the revenues more on the direct tax side as the GST rate would be more in the nature of clearing rate to offset the embedded input taxes.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ol>\n<p><b><span data-contrast=\"auto\">Conclusion:<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The recent upsurge in GST revenue, nudged up by better compliance, can be sustained by rate changes to increase the incidence of GST duty.\u00a0Meanwhile, the\u00a0buoyancy\u00a0in the GST revenues can sustain higher healthcare expenditures in the short run, which is welcome indeed.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Terms to know:<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"89\" aria-setsize=\"-1\" data-aria-posinset=\"201\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">Tax to GDP ratio<\/span><\/b><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"89\" aria-setsize=\"-1\" data-aria-posinset=\"202\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">Tax\u00a0buoyancy<\/span><\/b><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"89\" aria-setsize=\"-1\" data-aria-posinset=\"203\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">inverted duty structure<\/span><\/b><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"89\" aria-setsize=\"-1\" data-aria-posinset=\"204\" data-aria-level=\"1\"><b><span data-contrast=\"auto\">Goods and Services Tax<\/span><\/b><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"auto\">Source:\u00a0<\/span><a href=\"https:\/\/www.business-standard.com\/article\/opinion\/gst-a-turning-point-121062101630_1.html\"><span data-contrast=\"none\">Business Standard<\/span><\/a><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>How to improve Tax to GDP ratio\u00a0with GST?\u00a0 Context:\u00a0 For the last 25 years, our tax-to-GDP ratio has been stuck at between 16 and 17 per cent. This is\u00a0severely constraining our fiscal\u00a0capacity\u00a0to devote more resources to our underinvested sectors such as education and health.\u00a0\u00a0 How to improve tax to GDP\u00a0ratio\u00a0with GST?\u00a0 The goods and services&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/gst-a-turning-point\/\">Continue reading <span class=\"screen-reader-text\">GST: A turning point?<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,8043,9],"tags":[3203,8152],"class_list":["post-114287","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-current-affairs-cat","category-public","tag-gst","tag-tax-to-gdp-ratio","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1702200191},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/114287","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=114287"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/114287\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=114287"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=114287"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=114287"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}