Last month, India’s GST revenue reached a new height as the sales tax rose by 10% to $16 billion. The Prime Minister of the country, Narendra Modi estimated close to 1.15 trillion rupees monthly in revenue. However, it is not enough to bridge the gap in the government’s budget.
Upasna Bhardwaj and Suvodeep Rakshit at Kotak Mahindra Bank said, “If GST collections do not improve further and sustain, the pressure on the central government’s fiscal position will continue. The targeted growth of 24% in the financial year ending in March 31 will be difficult to achieve.
The fiscal deficit of India widened this year as well since Narendra Modi tried to earn votes by giving out cash to farmers and through tax cuts for the middle class.
An economist at ICICI Bank, Ashray Ohri said that the government must implement stringent rules to avoid tax evasion and boost compliance of direct and indirect taxes to lower the fiscal stress.
When GST was introduced in July 2017, the government presented it as a tool to increase tax compliance. The GST collections have surpassed the 1 trillion rupee-mark in the first three months this year.
Arvind Virmani, a former Chief Economic Adviser, said, “The jump in collections was expected to happen after the transition period of adjustment is over.”