Non-compliance in GST payments may be burning a ₹5-tn hole in revenues
NEWDELHI: The government may be losing ₹5 trillion in indirect tax revenue a year, amounting to 40% of its goods and services tax ( GST) c ol l ect i on t arget, because of defaults and evasion, according t o t he Fifteenth Finance Commission’s (FFC), confirming policymakers’ fears that businesses are not paying their fair share of taxes.
In a recent presentation made to the GST Council, FFC has assessed that the revenue loss was equivalent to 2.4% of gross domestic product. This works out to ₹5 trillion if one goes by the first advance estimate of nominal GDP for FY20 released earlier this month. This is as much as 40% of the GST revenue centre and states together may collect this year, going by the trend of an average ₹1 trillion a month GST revenue in the first nine months of the current fiscal.
I n t he ni ne months t o 3 1 December, central and state governments have collected more than ₹9 trillion in GST and hope to collect an additional ₹3.55 trillion by end of March.
FFC’S estimate of revenue loss from non-compliance is giving a strong backing to the tax administration’s bid to tighten enforcement at a time they are struggling to meet the revenue targets for the year. According to the FFC, India’s overall tax-to-gdp ratio is about 17.2%, which as per its calculations, should be about 22.6%.
There is a gap of about 5.4%, of which, GST compliance gap accounts for about 2.4% of the GDP, according to the FFC presentation, the highlights of which are now available in public domain from minutes of the meeting.