InvestorQ : GST collections have again been lower than expected for the month of August compared to July. What can the government do to improve GST revenues?
Ria Jain made post

GST collections have again been lower than expected for the month of August compared to July. What can the government do to improve GST revenues?

Anu Biswas answered.
3 years ago

In the last fiscal year 2018-19, there was a shortfall on GST collections to the tune of nearly Rs.105,000 crore. The monthly collections have not really improved in this year so the shortfall is continuing as of now. The RBI transfer off Rs.176,000 crore to the government is to bridge this gap. Here is what the government and the GST Council can do to improve the GST revenues in India.

· The on-boarding process for GST is still too complex and the GST Council can make a beginning with making the on-boarding process much simpler. The issue of PAN cards and Aadhar cards in India took off in a big way because the process of on-boarding was simple. Similarly, the online bank accounts took off in a big way because the on-boarding process was made simple. The same logic must be applied to GST also. That can give a big boost to GST collections.

· The existing presumptive scheme where small business can pay a flat GST and stay away from the complexities of GST credit is still too long winding. That needs to be simplified and the presumptive scheme must be extended to cover all small businesses so that collections can improve voluntarily without too much effort. The presumptive GST is currently restricted only to a handful of sectors and companies. In a country like India with millions of low revenue generating businesses, presumptive GST can be a wonderful method of increasing GST tax base without diluting the core purpose of GST. The lower GST rate and the simplicity will play a part in making the GST collections faster, higher and more robust. It will expand the base in a big way.

· There are some obvious anomalies in the GST rates and that need to be eliminated if the GST scheme has to be a success. We don’t need so many diverse rates of GST in India. Most of the items of common and regular usage can just be exempted from GST altogether. The 5% GST hardly contributes anything substantial to GST collections so they can be shifted to the 0% bracket. Secondly, the demerit rate must be restricted only to sin products and high-end luxury products. Currently, cars, scooters and even white goods pay 28% GST, which is not a very productive idea. Services have become expensive because the rate has gone up from 15% to 18%. Lower rates will mean better compliance and higher revenues.

· Many exporters have complained of the delay in refunds. The GST Council and the FM are working on this and have made some big changes and given assurances recently. But the devil will eventually remain in the implementation. The onus is on the government and the GST council to make the process convincing

GST Council has also made too many flip-flops on rates, due dates, procedures etc. Greater clarity and policy stability will go a long way.