GST Collection In India Is Below Potential, Says IMF
India, 17 Feb 2020 11:32 AM GMT
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In the study, it said that multiple rates, along with threshold for businesses to be included in the GST net have reduced the revenue potential.
The International Monetary Fund ( IMF) has stated that the goods and services tax (GST) collections in India have been below potential.
The study blamed multiple factors such as multiple rates along with exemptions, and implementation challenges for the poor GST collection in the country.
The study of resource mobilisation in India for the next five years had estimated that India in 2018-19 GST collection was 5.8 per cent of the GDP which is far below the potential mark of 8.2 per cent of the GDP, according to The Times Of India report. Although, the study observed that this is better than some of the developing countries, the efficiency gains from the new GST regime have not been fully accrued.
The IMF team, including Ruud de Mooij, Arbind Modi, Li Liu, Dinar Prihardini, and Juan Carlos Benitez has estimated that the compliance gap may be of the order of 40 per cent.
The international monetary body attributed to multiple factors for the difference in actual collections and the potential revenue. The study observed that exemption on food article alone are estimated to cost up to 0.4 per cent of GDP. The IMF team reportedly suggested the government to look at direct benefit transfer for the bottom of the pyramid segments.
The study said that multiple rates as against one or two rates in most countries along with threshold for businesses to be included in the GST net have reduced the revenue potential.
The body further noted that electronic filing of returns, e-way bills and cross-matching of invoices that traders and businesses have are burdensome and increase the compliance cost.
The government is currently working extensively to fix design flaws to rectify the shortfall in GST collections.
Also Read: Abrupt Slowdown In Indian Economy Due To Demonetization, GST: IMF Chief