GST Shortfall

Government needs to urgently find ways to plug the GST gap

For the month of November the GST collections came in sharply lower at around Rs.92,000 crore. Barring April and October, GST collections never managed to touch the magic figure of Rs.1 trillion. For the full fiscal year 2018- 19, the GST shortfall is expected to be nearly Rs.100,000 crore. That is a very large gap to bridge and it will have to be managed through other sources of revenues or higher borrowings. The challenge is to give a boost to GST collections. How to go about?

Simplify on-boarding

This is the first step to improve the GST collections. The issue of PAN cards and Aadhar cards took off in a big way because the process of on-boarding was simple. In the case of GST, the complex on-boarding process itself is becoming a barrier. That is the first step.

Extend presumptive scheme

The practice of paying a fixed GST as a presumptive 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 your GST tax base without diluting the core purpose of GST. It can be extended to all business outfits effective immediately. The lower GST rate and the simplicity will play a part in making the GST collections faster, higher and more robust.

Remove the anomalies in GST

If the GST has to be a real success in India and contribute substantially to revenues then most common anomalies must be done away with. We surely 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. According to most experts, the 5% GST hardly contributes anything substantial to GST collections. As well shift them to the 0% bracket. For the remaining businesses, there should be just one merit rate and one demerit rate. The demerit rate must be restricted only to sin products and high- end luxury products. Imposing 28% on products like white goods and two- wheelers is preposterous. In fact, for most services, 18% is a steep cost to be ultimately borne by the user.

Make the process convincing

GST, like any other tax, has its own complexities. That is inevitable. But there are two problems here. Firstly, GST refunds are not being processed on time. This problem especially becomes acute for exporters as the working capital gets locked up. Secondly, the claiming of input tax credit (ITC) is still not working smoothly. Lastly, but not the least, the GST Council has just made too many flip-flips on rates, due dates, procedures etc. If the procedure is simplified, it can actually improve the GST collections substantially.