Improved tax collection has provided the foundation for sustained and accelerated economic growth this decade, said V Anantha Nageswaran, Chief Economic Adviser to the government, on Monday in a report titled “The Indian Economy: A Review”. The report clearly mentions that it is not the annual Economic Survey, typically presented before the full budget and this year after the General Elections.
The CEA lauded the government for successfully bringing in the goods and services tax (GST). The document says that the “unification of the domestic markets brought in by the adoption of the GST incentivises production on a larger scale while reducing logistics costs.”
Emphasising the impact of the GST, it adds that the expansion of the tax base facilitated by the GST will strengthen the finances of the Union and state governments, enabling growth-enhancing public expenditures.
CEA and his team note that “to enhance the ease of living and ease of doing business, the taxation ecosystem in the country has undergone substantial changes in the post-2014 period. Tax policy reforms such as adopting a unified GST, reducing corporate and income tax rates, exemption of sovereign wealth funds and pension funds from taxes, and removing the Dividend Distribution Tax have reduced the tax burden on individuals and businesses and removed the distortionary incentives from the economy. The transformational GST has enhanced the tax base, reduced compliances, ensured a free flow of goods across states, and led to the formalisation of the economy.”
Talking about the success, the “GST system has shown improved buoyancy over the pre-GST regime, with consistently rising average monthly gross collections from ₹0.9 lakh crore in FY18 to ₹1.5 lakh crore in FY23. The number of GST taxpayers increased from 66 lakhs at its introduction to 1.4 crore in 2022, with a larger number of smaller businesses entering the regime.”
According to the review, to support economic growth, a combination of digitalising bureaucratic procedures, streamlining approvals of investment projects, easing legal constraints, creating a supportive tax eco-system with reduced corporate tax rates and a uniform
GST regime, and opening new avenues for private investors has ensured a non-adversarial policy environment.
GST has played an important role in improving logistics in the country. The review states that “the Unified Logistics Interface Platform (ULIP), under the National Logistics Policy, is integrated with 35 systems of eight different ministries and has 699 industry players registered on it. The platform intends to simplify and improve the efficiency of logistics processes for registered users. GST data is also being integrated with ULIP to provide multi-modal cargo tracking and demand-supply mapping for trade. An NCAER study published in December 2023 has shown that the logistics cost in the economy has declined by 0.8 to 0.9 percentage points of GDP between FY14 and FY22.”
Further sharing the thoughts on the logistical improvement and what impact GST has led to,
CEA and his team have written that “A report by Bernstein, "India's Promise: The Prosaic Path to Sustained Growth," highlights that there has been a significant reduction in logistics cost (as a percent of total value) for trucks after the implementation of the GST, accompanied by a rise in the distance travelled per day."
It added that the average turnaround time (per day) at major ports has gone down from 4.2 days during FY04-FY14 to 2.9 days during FY14-FY22. The government’s massive push for capex not only reduced logistics costs but also bolstered the construction industry. This, coupled with the measures to increase domestic steel production and the focus on affordable housing, has helped India achieve a growth of around 12% per annum in construction from FY22 to FY24.
The IndiaStack not only facilitated the GST rollout in 2017 but also evolved itself through the feedback loop. The GSTN served about 140 lakh active taxpayers in April 2023, up from 105 lakh in April 2018.
(Edited by : Ajay Vaishnav)
