The Goods and Services Tax (GST) signifies a comprehensive levy on the production, sale, and consumption of goods and services across India. This tax framework not only simplifies the intricate tax structure by removing cascading tax impacts but also serves as a crucial indicator of economic growth.
Over the years, GST collections have displayed diverse trends. A significant milestone was achieved in the first half of 2023-24, with average monthly collections hitting ₹1.65 trillion. This marks a noteworthy recovery from the pandemic years, where collections initially fell from ₹1.20 trillion in 2018-19 to ₹0.98 trillion in 2019-20. However, as the economy regained its pace, collections rebounded.
Since GST's implementation, there has been a marked improvement in tax buoyancy. Both the Centre and states have experienced heightened revenue buoyancy, aiding in the consolidation of the nation's financial standing. Finance Minister Nirmala Sitharaman highlighted that the reduced tax burden on consumers has led to increased revenue buoyancy, with revenues in the first half of 2023-24 being 11.20% higher than the previous year.
Tax buoyancy quantifies the responsiveness of tax revenue to national income or GDP changes. A buoyancy greater than one indicates that tax revenue grows at a faster rate than GDP, reflecting an efficient tax regime.
While average monthly GST collections have surpassed pre-GST benchmarks, a comparison with GDP reveals distinct differences. For example, GST revenue growth was 6.80% of GDP in 2016-17, improving to 6.63% in 2022-23.
Experts suggest rationalizing the current GST slabs. Adopting a three-rate structure comprising a standard rate, a merit rate, and a demerit rate could be more effective and align with the 15th Finance Commission's recommendations.
In conclusion, the GST regime has significantly enhanced tax buoyancy in India. Continuous evaluations and refinements, based on economic trends, are pivotal for optimizing its influence on the economy.
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