Widen GST tax base

Revenues from the Goods and Services Tax (GST) crossed the Rs 1 lakh crore mark in April, marking an important milestone for the new tax system. This was actually revenue collections for March, payable in April. The average monthly collections for the first eight months after the new system came into being was over Rs 89,000 crore and now the average, including the April collection, is over Rs 91,000 crore. This figure is a benchmark because that was the amount of revenue lost when the new system was introduced, and collections of that order showed that the system has recaptured the old revenue level. Additional revenues are gains. The collections were uneven in the months since July 1 when the GST system was introduced but the volatility may be behind now. As the government has indicated, the April revenue may have included some arrears from previous months. That shows a welcome trend of increasing compliance.

It can now be assumed that the GST system has stabilised after many initial glitches and uncertainties. Increasing revenues are not the only proof of that. About 69.5% of the over 88 lakh assessees have filed their returns. The compliance rate has steadily increased from July till now, and that is a sign of the shrinking window for evasion. A number of measures taken after the launch of the system, which was a hurried affair, have helped to make the working of the system more smooth. The introduction of e-way billing, which tracks the movement of goods, from last month was an important factor. It should now be extended to intra-state transportation also. The problems in the GST Network, the IT backbone of the system, have been resolved. Filing of returns and getting the input tax credit will also become easier by the end of the year, with the GST Council approving a new comprehensive and simplified returns mechanism.

The government has claimed that the higher revenues are a result of an increased economic activity. This is doubtful, and the gains may mostly be accounted for by the straightening of procedures, better functioning of the system and its improved acceptance by assessees. But faster economic growth will certainly lead to progressively increasing revenues. With the functioning of the system near normal now, the next stage should be to widen the GST tax base by including sectors like power, petroleum products, real estate and alcohol within its purview. These are important sectors of economic activity. There is no rationale for keeping them out. Their inclusion will not only boost revenues but make these sectors more efficient and transparent. Discussions for this must begin now.