The Economic Survey 2023, tabled before the parliament by the Financial Minister Nirmala Sitharaman reviewed the performance of the Indian economy to date and sheds some light on the economic road ahead for the next fiscal year.
The positive GST revenue collection trends have strengthened further despite the pandemic. The average monthly gross GST collection has increased from ₹0.90 lakh crore in FY18 to ₹1.49 lakh crore in FY23. Evidence suggests that the buoyancy of the indirect tax system replaced by GST has improved in the post-GST regime.
Buoyancy is the measure of how tax revenues vary with changes in output, which is an important ingredient of any tax system. It also answers whether greater growth will raise revenue and allow keeping the fiscal balances in check. It illustrates the role that revenue policy plays in ensuring fiscal sustainability in the long run, and in stabilizing the economy over the business cycle in the short-run.
Back to the situation in India, since other tax reforms, such as the corporate tax cut, were followed by the pandemic-led uncertainty and disruptions, their impact on collections is gradually becoming visible in higher tax collections. The Corporate tax collections for April to November 2022 have increased by 21.1 percent on a Year over Year basis compared to a longer-term average YoY growth of 10.3 percent during the corresponding period from FY13 to FY19.
“One prominent reason behind the higher revenue buoyancy is the introduction of technology-backed tax governance reforms for simplifying tax processes, enhancing compliance, and improving fraud detection systems. The faceless assessment and appeal systems no longer require a physical interface between taxpayers and the Income Tax department”, as identified in the annual economic review.
Furthermore, “multiple consistency checks possible with integrated digital systems reduce tax evasion. As an illustration, the GST return filing mechanism results in better income reporting, leading to higher direct tax collections. In this regard, the decision to share data and information between CBDT and CBEC on an automatic and regular basis is a promising reform, and it would result in efficiency gains in the tax system”, the economic survey observed.
The reforms are also expected to produce equally good results for future economic growth and future resource mobilization in the economy.
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