Economic Survey 2017-18: Tax base – Note ban, GST broadened net

By: | Published: January 30, 2018 6:07 AM

Budget 2018: According to the survey, the taxes subsumed under GST amounted to an all India revenue of Rs 9.7 lakh crore in FY17. It added that GST will garner Rs 10.9 lakh crore in FY18, which represents a growth of just over 12% in indirect tax collections.

budget 2018, union budget 2018, demonetisation, GST, tax baseBudget 2018: Demonetisation and Goods and Services Tax (GST) led to an increase in new taxpayers coming into the income tax (I-T) net, the Economic Survey said on Monday.

Budget 2018: Demonetisation and Goods and Services Tax (GST) led to an increase in new taxpayers coming into the income tax (I-T) net, the Economic Survey said on Monday. It said that 18 lakh additional new taxpayers were added in the 13 month period post demonetisation, which represented an uptick over the average yearly growth trend of the last six years in the corresponding period. The survey said that the growth in additional new filers was about 10% during the said 13-month period in the last six years prior to November 10, 2016. However, this rose to 31% in November 2016-November 2017 period.  As FE had reported earlier, the data from Central Board of Direct Taxes (CBDT) shows that number of e-filings have grown well over 20% annually since FY13 (except in FY15 when growth was 15%), including in FY18 so far. On the indirect tax front, the survey said that the taxpayer base grew by more than 50% since GST was rolled out in July last year. The combined tax base in the pre-GST regime was 64 lakh, which consisted of registrants under excise, service and VAT systems. This has now jumped by 34 lakh to 98 lakh under the new indirect tax system. The latest data from the government has now pegged the total registrants at a little over 1 crore. “But the two numbers are not comparable: registrants in the old system were not unique, since many taxpayers were registered under several taxes. Adjusting the base for double and triple counting, the GST has increased the number of unique indirect taxpayers by more than 50% — a substantial 3.4 million,” the survey said. The survey took note of 17 lakh composition scheme taxpayers under GST and inferred that many businesses had voluntary registered despite being below the revenue threshold of `20 lakh as GST encouraged voluntary compliance.

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However, the government had earlier suspected large scale tax evasion among composition dealers as they had only paid an average of `350 crore in taxes in two quarters since July. The tax payment suggested that the average sales of registered composition dealers was around Rs 9 lakh annually, way below the GST threshold level.
Despite the prevailing confusion and anxiety surrounding GST collections, the survey said that provisional assessment indicated that “revenue collection under the GST was doing well, surprisingly so, for such a transformational reform.”

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According to the survey, the taxes subsumed under GST amounted to an all India revenue of Rs 9.7 lakh crore in FY17. It added that GST will garner Rs 10.9 lakh crore in FY18, which represents a growth of just over 12% in indirect tax collections. “Given nominal GDP growth of 10.5% projected in the survey, buoyancy amounts to 1.14, above the historical buoyancy for indirect taxes of 0.9. In the initial phase of such a large disruptive change, this performance is noteworthy. The GST promises to be a buoyant source of future revenues,” the survey said. Further, the survey said the highest number of GST registrants were in the states of Maharashtra, Uttar Pradesh, Tamil Nadu and Gujarat. Uttar Pradesh and West Bengal have seen large increases in the number of tax registrants compared to the old tax regime. “The distribution of the GST base among the states is closely linked to the size of their economies, allaying fears of major producing states that the shift to the new system would undermine their tax collections,” the Survey said. The Survey said based on the trends of revenue collections, the revenue neutral rate (RNR) of GST should be between 15-16%. In December 2015, a Subramanian-headed panel had recommended RNR should be between 15-15.5% for GST, with a preference for the lower one.

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