Broaden GST net, cut cesses to reduce tax burden
Goods and services tax collection crossed the landmark of Rs 2.1 lakh crore for the first time in April. Truth be told, April has always seen higher collections, thanks in part to year-end adjustments in tax assessments. But what sets apart the latest haul is that a part of the 12.4 percent increase over last year was led by a healthy growth in domestic sales, particularly from premium products and services including automobiles, consumer durables, hotels and restaurant services.
Decisive action against fraudulent registrations, fake invoicing and stricter compliance norms also helped shore up the revenues. It’s likely that the average monthly collection will be lower than Rs 2 lakh crore in the coming months, but if the double-digit growth continues, then the 2024-25 budget targets will be comfortably outstripped like in 2023-24 and 2022-23.
While the headline number is heartwarming, one critical metric is flashing a sign of weakness. The GST-GDP ratio, which gauges tax revenue relative to the size of the economy, is yet to show a dramatic jump. From 5.7 percent in 2020-21 it rose to 7 percent in 2023-24, and has significant room for improvement.
