The Economic Survey 2018-19

Gross tax to GDP ratio dips to 10.9% in FY’19

An illuminated Parliament ahead of midinight launch of 'Goods and Services Tax (GST)' in New Delhi.   | Photo Credit: PTI

The gross tax to GDP ratio declined to 10.9% in 2018-19 as indirect tax revenues fell short of budget estimates by about 16 per cent, due to shortfall in Goods and Services Tax (GST) mop up, the Economic Survey said.

The survey, authored by Chief Economic Advisor Krishnamurthy Subramanian, also suggested that the cooperative federalism as depicted by the GST Council can be replicated in labour and land regulation.

In 2018-19, direct taxes grew by 13.4% owing to improved performance of corporate tax. However, indirect taxes fell short of budget estimates by about 16%, following a shortfall in GST revenues as compared to the budget estimates.

“Accordingly, gross tax revenue as a proportion of GDP declined to 10.9% of GDP in 2018-19, lower by 0.3 percentage points as compared to 2017-18,” said the survey tabled in Parliament by Finance Minister Nirmala Sitharaman.

The Government had budgeted to collect ₹11.50 lakh crore from direct taxes and ₹7.43 lakh crore from GST in 2018-19.

The survey said though there has been improvement in tax to GDP ratio over the last six years, gross tax revenues as a proportion of GDP has declined by 0.3 percentage points in 2018-19 over 2017-18.

“Indirect taxes have fallen by 0.4 percentage points of GDP primarily due to shortfall in GST collections. This has been partly offset by 0.1 percentage points increase in direct taxes,” it said adding that GST collections are yet to stabilise.

Revenue buoyancy of GST will be key to improve the resource position of both central and State governments, the survey said.

The survey further noted that fiscal federalism strengthened significantly when the 14th Finance Commission increased the share of states in the divisible pool of central taxes from 32% to 42%.

“Niti Aayog has helped institutionalise cooperative federalism by setting up teams from both the states and the central government to jointly evolve strategies for addressing development challenges. States have also been involved in a friendly competition to improve their Key Performance Indicators (KPIs),” the survey said.

Stating that the launch of the GST in July, 2017, added a new dimension to centre-state and inter-state financial relations, the survey said “the GST Council experience provides key learning for implementing cooperative federalism in several other areas such as labour and land regulation“.

In the run-up to the implementation of India’s biggest indirect tax overhaul Goods and Services Tax on July 1, 2017, the Centre and states had agreed to set up a GST Council, chaired by Union Finance Minister and comprising finance ministers of all states.

The introduction of the GST represented an instance where policymakers exhibited the appetite to introduce bold reform by eschewing loss aversion, the survey said.

Stating that introduction of GST barely increased the economic policy uncertainty despite the enormous change that it entailed, the survey said “this illustrates that path-breaking reforms that are consistent with a well-articulated vision do not create as much disruption as some people may fear“.

The survey said after the initial transitional issues following the roll-out of GST, revenue collection picked up from annual average of ₹89,800 crore in 2017-18 to ₹98,100 crore in 2018-19.

Talking about use of technology in tax administration, the survey said it has decreased manual intervention and improved the experience of a large majority of taxpayers.

Better tax administration, widening of TDS carried over the years, anti-tax evasion measures and increase in effective tax payers base have contributed to direct tax buoyancy.

“Widening of tax base due to increase in the number of indirect tax filers in the GST regime has also led to improved tax buoyancy. Going forward, sustaining improvement in tax collection will depend on the revenue buoyancy of GST,” it added.


Our code of editorial values

Related Topics
This article is closed for comments.
Please Email the Editor

Printable version | Oct 12, 2021 4:56:23 PM | https://www.thehindu.com/business/budget/gross-tax-to-gdp-ratio-dips-to-109-in-fy19/article28282280.ece

In This Package
Economic Survey: Aadhaar aided MGNREGS beneficiaries
FDI needed to spur the virtuous cycle in India, says CEA Krishnamurthy Subramanian
Survey calls for tax cuts, space for hotels in infra boost to tourism
Economic Survey moots central welfare database of citizens
India could host ‘Detroit’ of EVs
‘Reward top taxpayers, shame defaulters’
Well-designed minimum wage system required to reduce wage inequality, says Economic Survey 2018-19
Economic Survey 2018-19: Private funds needed for Swachh Bharat
Economic Survey 2018-19 calls for improvement in contract enforcement regime
‘Recovery under IBC higher at 43%’
More than half of start-ups are from tier-2 and tier -3 cities: Survey
Economic Survey: shift focus to water productivity
Economic Survey 2019 in six charts
India must spend $200 billion on infra annually; harnessing pvt. investment a challenge: Economic Survey
No train collisions in 2018-19, fire incidents rise: Economic Survey
Finance Ministry makes progress in strategic sale of 28 Central Public Sector Enterprises
Economic Survey lays out blueprint for $5 trillion economy
Read: Full text of Economic Survey 2019
India needs to increase energy consumption to raise per capita income: Eco Survey
Economic Survey calls for enhanced efficiency in judiciary to help improve ease of doing business
India’s march towards SDGs anchored in investing in human capital, inclusive growth: Economic Survey
Debt recovery mechanism strengthened with IBC, says Economic Survey
Economic Survey 2018-2019 proposes to raise retirement age
You are reading
Gross tax to GDP ratio dips to 10.9% in FY’19
Economic Survey suggests merging of different datasets held by govt
Economic Survey: Many states became open defecation free since launch of Swachh Bharat
Next Story