Creating certainty – GST Revenue Buoyancy: Time to Simplify and Expand | 7 December 2023 | UPSC Daily Editorial Analysis

What's the article about?

• It talks about the positive performance of GST revenue in the first half of FY24, with October and November witnessing significant increases. It also offers some suggestion to make GST more simple and expanded.

Relevance:

• GS3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment

Context:

• The article highlights the positive performance of GST revenue in the first half of FY24, with October and November witnessing significant increases. This growth is attributed to festive season spending and improved compliance measures.
• However, concerns remain regarding pending taxpayer appeals and the complexity of the tax system. The article urges the government to focus on simplifying the GST and bringing excluded items under its umbrella.

Key Takeaways:

• GST revenue crossed ₹3.4 lakh crore in October and November, marking the second and third highest monthly collections.
• Festive season boosted revenue growth, with November seeing a 15.1% increase and ₹1.68 lakh crore collected.
• Economists believe central GST receipts may exceed budget estimates.
• Concerns remain regarding tax compliance and the need for simplifying the GST structure.
• Pending appeals and excluded items like petroleum and electricity require attention.
• The GST Council must remain focused on unfinished reforms and act post-election.

Analysis:

• The Goods and Services Tax (GST) has demonstrated positive revenue growth in recent months, exceeding expectations.
• October and November witnessed the second and third highest monthly collections, respectively. This momentum, driven by festive season spending and improved compliance efforts, suggests that central GST receipts may surpass budget estimates.
• Despite the encouraging revenue performance, concerns linger regarding the complexity of the tax system and the need for further simplification.
• The recent surge in tax demand notices and investigations has raised concerns among businesses.
• Finance Minister Nirmala Sitharaman acknowledged the need for greater certainty and predictability within the GST framework.
• Several key reforms are needed to improve the GST system. These include:
  • Resolving pending taxpayer appeals: Appeals against central GST levies have risen significantly, highlighting the need for operational appellate tribunals to clear this backlog and set precedents for future disputes.
  • Bringing excluded items into the GST framework: Petroleum and electricity are currently excluded from the GST, creating distortions and inefficiencies. These items should be brought under the GST umbrella.
  • Simplifying the rate structure: The current multiple rate structure is complex and cumbersome for businesses. A simplified rate structure with fewer slabs would be easier to administer and comply with.
  • Maintaining focus on unfinished agenda: With elections approaching, there may be a temptation to delay reforms. However, the GST Council should continue to work on its to-do list so that these steps can be implemented quickly after the elections.

Way Forward:

• While some delay in addressing these reforms due to the upcoming general election is understandable, the GST Council must maintain focus and ensure continued deliberation on its agenda. Prompt action on these issues following the election will be essential to solidify the GST's effectiveness and bolster its role as a driver of economic growth.