GST: Indirect Tax Collection To See Sharp Fall Until September

The newly implemented Goods and Service Tax (GST) is set to boost transparency as well as indirect tax revenue for the exchequer. However as per the finance ministry estimates for the first three months, the tax collection shall see a sharp fall, the quantum of which is not known.

The tax experts as well as government officials cite reasons such as application of backdated invoices, liability of paying credit on transition stock as well as advance tax payment towards the end of the last fiscal year as some of the reasons for the expected drop in revenue atleast till the month of September.

For the fiscal year ending March 2017, both service tax and central excise duty collection saw an increase of 20.2% and 33.9% respectively. To mitigate the issue, GST Council has agreed to compensate states for any decline in revenue collection if it fails to register an increase of 14% in comparison to FY 16 base. For it the compensation fund shall remain active for the initial period of 5 years so as to enable states in tiding over the unprecedented scenario due to the new tax regime.

A government official says, "The slump in revenue in the initial months of GST regime is a part of shared experience of other countries as well, and we expect the same to happen here but it's nearly impossible to quantify it". As per other official practices arousing suspicion will be done away with over time under GST, nonetheless the resistance to effect the change will take quite some time. For the same, ministry is accounting its impact.

The indirect tax collection shall begin to gain momentum only from October and is expected to stabilize only in December. Another tax expert commented "The GST impact is so varied and wide that it's hazardous to guess the trajectory of revenue but the true picture would emerge only in January next week when it would be safe to compare the revenue collection figures with corresponding period of a year before".

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