Tax buoyancy raises hopes for reductions in GST rates


A day after finance minister Arun Jaitley said that goods and services tax (GST) collections in the first month had been better than expected, the government on Wednesday indicated that the kitty could swell further as more taxpayers file their returns and small traders who are part of the compensation scheme also paid up, triggering expectations that rates could moderate in the months ahead if receipts continue to be robust.

Jaitley suggested that it would be prudent to wait for sometime to assess a long-term trend. “One has to study the pattern over several months. It has started off well… one has to see how it progresses over the next few months,” Jaitley told reporters after a meeting of the Union Cabinet, where it was decided to raise the cess on bigger cars.

The minister was, however, clear that benefits of the GST regime should go to the common man, while luxury goods and products such as cigarettes will face a higher levy.

At the time of rollout, Jaitley had publicly said tax buoyancy and a wider tax base could help the government and the state governments moderate tax rates. He had said there was a possibility of converging the two standard rates – 12% and 18% -over a period of time, if collections were healthy .

Government officials said it was too early to comment on changes in rates given that the new tax regime was settling down. But early trends from July have raised expectations that some of the shortfall in Centre’s receipts for the current financial year due to lower RBI dividend and a lower-than-budgeted collection from the telecom sector could be bridged through higher GST collections.
While the tax base has been expanded, which has resulted in addition of around 15 lakh tax payers, PM Narendra Modi during his monthly meeting with state chief secretaries asked for a further push to get more traders to register “to achieve a quantum jump in this regard within a month”.
At the same time, Jaitley also issued a warning to evaders. “You need to be reasonable in your rates, you need to be reducing the compliance burden as far as procedures are concerned, you need to use more technology… But at the same time you need to carry the stick,” Jaitley said at a book release function.


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