Home >News >India >Economic Survey warns Centre, states' fiscal health depends on GST mop-up
Krishnamurthy Subramanian, India's chief economic adviser. (Bloomberg)
Krishnamurthy Subramanian, India's chief economic adviser. (Bloomberg)

Economic Survey warns Centre, states' fiscal health depends on GST mop-up

  • The Survey warned that next fiscal year posed several challenges for the government on the fiscal front amid an economic slowdown
  • Overhauling of tax system may be on the cards

New Delhi: Growth in Goods and Services Tax (GST) collections holds the key to the fiscal health of the Union and state governments in the future, the Economic Survey for fiscal 2019-20 tabled in Parliament by Union finance minister Nirmala Sitharaman on Friday said, hinting that an overhaul to the tax system may be on the cards.

The Survey warned that the next financial year posed several challenges for the government on the fiscal front amid an economic slowdown. “The financial year 2018-19 has ended with a shortfall in GST collections. Therefore, revenue buoyancy of GST will be key to improved resource position of both the central and state governments," said the Survey.

The Survey's observation is indicative of the central government’s theory that overhauling the indirect tax system is essential to realise the full potential the new tax system holds for economic growth and revenue collections.

Goods and services tax (GST) collections exceeded the 1 trillion mark for the second straight month in December, bringing some relief to policymakers fighting to boost consumption and liquidity in a slowing economy.

Central and state governments together collected 1.03 trillion in December, up 9% year-on-year.

After the Union Budget is presented, federal indirect tax body, the GST Council, is expected to review the suggestions received so far, including changes in tax slabs to rework the GST. The Survey also emphasized on the need for finding resources for the welfare schemes of the Centre without having to borrow more.

“There are apprehensions of slowing of growth, which will have implications for revenue collections. Resources for the now expanded Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) and Ayushmaan Bharat, as well as new initiatives of the new Government, will have to be found without compromising the fiscal deficit target as per the revised glide path," said the Survey.

It also warned that any surge in oil prices could impact subsidy on certain petroleum products. The recommendations of the Fifteenth Finance Commission on tax devolution will also have major implications for Central government finances, the survey said.

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