The creation of e-way bills in October suggests that November’s collection will either equal or exceed the peak of Rs 1.87 lakh crore recorded in April 2023.
The anticipation of GST officials regarding revenue collection is peaking as November 30 draws near. October’s e-way bill generation has already raised a lot of expectations. Compliance and consumption together should mean that November’s collection will either come very close to or surpass the all-time high of Rs 1.87 lakh crore (April 2023) in revenue.
The public will receive access to November’s GST collection data on December 1.
Concerns about measurement and falling below the measured revenue neutral rate (RNR) have been voiced by public finance commentators, including the Reserve Bank of India and the 15th Finance Commission, regarding the Goods and Services Tax (GST) implementation rate structure.
Over the course of economic stimulus measures, several rate reductions have been implemented. The primary focus remains on expeditiously reinstating the RNR, aiming to fuel comprehensive revenue growth. This initiative serves as a protective shield for state governments, mitigating the impact of potential losses in guaranteed State-Goods and Services Tax (SGST) revenue.
However, there are two important reasons why this strategy of sharply raising rates needs to be carefully reevaluated. First off, the effect of taxes on economic agents and GST rates are not the only factors influencing revenue growth.
Theory of Consumption Markets
These variables exhibit a counter-relationship beyond a certain point, and the threshold itself varies according to consumption-demand dynamics and demand’s sensitivity to price. Second, variations in the consumption graph continuously affect the RNR, which is not a constant value.
The market for consumption is extremely dynamic and in more flux right now than it has ever been. As a member of the Prime Minister’s Economic Advisory Council, Sanjeev Sanyal correctly pointed out that the goal of reducing the GST rates and tax structure is to increase tax revenue while minimising its negative effects on the economy, not to raise or decrease the average level of taxation.
It is imperative to avoid additional indirect taxes that could further reduce overall demand in a situation where consumption is leveraged, leading to the RBI raising the risk of relying on insecure loans.
Enhancement of GST Compliance
It has been demonstrated throughout the world that enhancing compliance and broadening the tax base are more appropriate strategies for raising revenue than depending only on tax rates. As a destination-based consumption tax, the GST seeks to create an “output effect” and restrict taxation to the value added at each stage.
It is anticipated that until revenue is actually impacted, an upright cycle of incremental value creation will permit a progressive reduction in tax rates.
