Economic Survey 2018: GST led to more than 50% increase in number of unique indirect taxpayers

The Economic Survey 2017-18, presented on Monday in the Parliament by Finance Minister indicates that India may soon reach a steady state on GST, which has been characterised by multiple rate changes, teething return filing problems and procedural irritants since it kicked-in from July  1 in a grand midnight event in Parliament.

A preliminary analysis shows that there has been a 50 percent increase in the number of indirect taxpayers, besides a large increase in voluntary registrations, especially by small enterprises that buy from large enterprises and want to avail Input Tax Credits (ITC), deductions for taxes already paid.

As on December 2017, there were 9.8 million unique Goods and Service Tax (GST) registrants, slightly more than the total indirect tax registrants under the old system (where many taxpayers were registered under several taxes).

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「Therefore, adjusting the base for double and triple counting, the GST has increased the number of unique indirect taxpayers by more than 50 percent –a substantial 3.4 million,」 the survey said.

Similarly, there has been an addition of about 18 lakh individual income tax filers since November 2016.

While GST has been widely heralded for many things, especially its potential to create one Indian market, expand the tax base, and foster cooperative federalism, the survey pointed out an 『enormous benefit』 of the new indirect tax system.

「It will create a vast repository of information, which will enlarge and surely alter our understanding of India’s economy,」 it said.

The profile of new filers is interesting as their total turnover, business-to-consumer (B2C) transactions account for only 17 percent of the total. The bulk of transactions are business-to-business (B2B) and exports, which account for 30-34 percent apiece.

It also underlines that the distribution of the GST base among the states is closely linked to the size of their economies, allaying fears of major producing states that the shift to the new system would undermine their tax collections.

The survey also flagged the need to address the issues of pendency in dispute resolution to turn the country into a more business-friendly place.

「These issues hamper dispute resolution and contract enforcement, discourage investment, stall projects, hamper tax collection, stress tax payers and escalate legal costs,」 it said.

The Survey also stated that fears of major producing states that the shift to the new system would undermine their tax collections have been allayed as the distribution of the GST base among the states got closely linked to the size of their economies.

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