Union Budget 2020 India: As the overall revenue collections from Goods and Services Tax (GST) remain muted on the back of slow economic growth, it is unlikely that the government will give any indication to raise GST rates to grow revenue.
Budget 2020 India: As the overall revenue collections from Goods and Services Tax (GST) remain muted on the back of slow economic growth, it is unlikely that the government will give any indication to raise GST rates to grow revenue, according to an industry survey. “While suggesting ways to augment both tax and non-tax revenue collections, economists pointed out to persistently weak demand conditions as a major impediment that was inhibiting India’s growth,” industry body FICCI said in its Economic Outlook Survey report. Economists were cautious in recommending raising GST rates to improve revenue collections. The move could risk private consumption falling further, which could, in turn, impact the country’s economic growth along with future collections from taxes, the report added.
While it is difficult to improve growth from taxes, economists suggested boosting revenue from non-tax sources. “A structured long-term plan must be prepared to outline the course of action and predict earnings from non-tax sources,” the report said. Creating more provisions like the Bharat 22 Exchange Traded Fund (ETF) is required. Furthermore, aggressive disinvestments and monetization of government assets are essential in order to up the stress on fiscal balances. Some measures to use data analytics extensively to plug leakages and non-compliance with tax laws are also expected in the upcoming budget. In addition to this, e-payments might be mandated for the informal sector too, the report said.
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Economists further suggested simplifying and easing the taxation regime. According to the report, pushing growth rate by opting for expansionary fiscal and monetary policies is required to improve the nominal growth in the economy. Moreover, a slew of reforms to tackle the structural problems facing the economy are also required, the report added. As the tax collections have fallen short of the budgeted target which is straining the fiscal situation, the government must consider “rationalizing subsidies to reduce leakages and prevent wasteful expenditure”. Furthermore, the sale of huge food stocks with the Food Corporation of India in the open market can also generate good revenues for the government and help improve the nominal growth of the Indian economy.