Skip links

One year of GST : Benefits and Losses

“Good and Simple Tax” — that is how Prime Minister Narendra Modi introduced the Goods and Services Tax (GST) to Indians, in his speech at the launch of the new tax regime a year ago. GST was rolled out in the intervening night of June 30 and July 1, last year, in a ceremony held in the Central Hall of Parliament.

The government has planned a mega event to celebrate the first anniversary of GST on July 1, which has now been christened ‘GST Day’. “Union Minister for Railways, Coal, Finance & Corporate Affairs Piyush Goyal will preside over as the Chief Guest of the event and Minister of State for Finance, Shri Shiv Pratap Shukla will be the Guest of Honour,” the finance ministry said in a statement.

Union minister Arun Jaitley who was instrumental in the implementation of GST would be addressing the gathering through video conferencing, news agency PTI reported. Jaitley is currently recuperating from a kidney surgery and Goyal is in-charge of the finance ministry in his absence.

In his GST launch speech last year, PM Modi had likened teething problems of the new tax system to ‘adjusting to a new pair of spectacles’.

A year later on Friday, Arun Jaitley in a blog post wrote, “Last year, the impact of the GST on direct tax collection was not visible. Since GST had been imposed in the middle of the year, it will be more apparent this year.”

In the post, Jaitley credited GST for having a ‘significant impact’ on the hike indirect tax collection too. “Those who have disclosed a business turnover for the GST now find it difficult not to disclose their net income for the purposes of income tax,” Jaitley said.

The Modi government has canvassed improvement in tax collection and compliance as one of its major successes on the economic front.

Another area where the finance ministry could take pride is fiscal consolidation. The fiscal deficit under this government has largely remained under control despite not being able to meet the target in the last financial year (FY).

The fiscal deficit is the difference between total revenue and total expenditure of the government.

In the budget for FY 2018-19, Arun Jaitley set the fiscal deficit target for 2018-19 at 3.3 per cent of the gross domestic product (GDP) to accommodate higher demand for expenditure against the earlier target of 3 per cent. The government also revised the deficit target for the year ending in March 2018 to 3.5 per cent of GDP from the targeted 3.2 per cent.

With the May fiscal deficit touching 55.3 per cent of the budget estimate (BE), the government would require a steady and healthy flow of revenues from GST to be able to meet the fiscal deficit target.

Collection from GST had been choppy through a large part of the last year but has stabilised in the last few months on the back of anti-evasion measures like the rollout of the e-way bill. GST collection in May amounted to Rs 94,016 crore, down from April’s record Rs 1.03 lakh crore but well above the monthly average since the tax was rolled out last year.

The government would thus, bet big on its year-old flagship tax reform to keep its coffers in a good shape to be able to carry out expenditures without fiscal pressure in the election year. The fact that revenue deficit had shot up to 2.6 per cent of GDP in FY 2017-18 from the budget estimate of 1.9 per cent, will make the government even more vigilant.

GST was rolled out a year ago in a setting which many compared to Jawaharlal Nehru’s famous ‘tryst with destiny’ speech on August 15, 1947. As the GST regime stabilises, India’s biggest tax reform has the onus to keep the country’s finances steady as we head to a general election.


Leave a comment