New Delhi: The recent cuts in goods and services tax (GST) rates will exert pressure on India’s fiscal consolidation road map and are therefore credit negative, Moody’s Investor Service said on Monday.

In a research note, Moody’s estimated the revenue loss from these tax cuts at around 0.04%-0.08% of GDP annually.

“Although the proportion of revenue loss is small, the vacillation in tax rates creates uncertainty around government revenue and comes amid persistent upside risks to its expenditures," Moody’s said.

Rates on a number of consumer durable items such as refrigerators, washing machines and small television sets were lowered with effect from 27 July.

“The tax cuts, which follow cuts in January 2018 and November 2017, will weigh on the government’s revenue collections and are credit negative because they will pressure the government’s fiscal consolidation effort, which is already diminished relative to the original fiscal deficit targets set last fiscal year," Moody’s said.

Union minister Arun Jaitley said in a blog last week that the exchequer incurred a total revenue loss of 70,000 crore from all the rate cuts since the roll-out of GST on 1 July 2017.

Moody’s said frequent rate changes make it difficult to achieve the GST collection targets though it will boost consumption demand.

“Despite initial disruptions to the GST implementation, GST collection has increased since December 2017, but iterative changes to tax rates create downside risks to the target of 7.4 trillion ($100 billion) for the full fiscal year," the note said, adding GST collections will be an important driver of future government revenue because of a wider tax base and tax buoyancy.

Moody’s said risks to India’s fiscal deficit target for 2018-19 are emerging from both the revenue and the expenditure side.

“We had considered the central government’s 3.3% deficit target for fiscal 2018 to be achievable, but risks are toward the downside given the potential shortfall in GST collections. Meanwhile, upside pressure on expenditures stems from a new minimum support pricing formula for agricultural products and higher social spending," Moody’s added.