It will be worthwhile to explore if direct taxes could further be lowered and the exemptions done away with
The full-year foods and services tax collection in 2022-23 is pegged at Rs 18.1 lakh crore. There is a reasonable estimation that the country may net Rs 24 lakh crore in 2023-24. The monthly GST collections have consistently been above the Rs 1.5-lakh crore threshold for a number of months.
The March collection at Rs 1.6 lakh crore, on the back of a 13 per cent growth rate, is reassuring. It’s also comforting that the robust growth in indirect tax collections has come on the strength of domestic consumption growth. This is also captured in the numbers of the automobile sector.
The index of prosperity could be measured from the date of the sales of SUV vehicles, which reported 27 per cent in the last fiscal. This is being hailed by business observers as the best-ever performance of the automobile sector. Clearly, more people are hitting the road in their SUVs.
The extent of road development in the country in the last nine years has already been well documented. Now, people have the confidence that they can slip behind the steering wheel for a long journey on well-developed and maintained roads all across the country. This augurs well for the economy. Roads are the key drivers of the economy, as the movement of logistics with ease and speed will help not only in making India into a well-knit and unified market but also help the country take the rightful position in the global supply chains.
This is captured in the GST data. The interstate trade is growing fast. Month-on-month growth in the integrated GST, which is the measure of interstate trade, is growing at close to a 20 per cent rate, accounting for the largest kitty in the overall collections at Rs 82,907 crores in March. More than half of the GST collections are accounted for by the IGST. This should boost the confidence of the traders.
At the same time, the Central Government has unveiled the new foreign trade policy for 2023, which aims for India to hit the $2-trillion trade by 20230. An integrated Indian market, backed by the seamless movement on the strength of robust infrastructure consisting of roads, ports, and railways, would surely make the target of $2 trillion in trade by 2030 a realistic goal.
By 2030, India should be within striking distance of becoming the fourth largest economy in the world. Fast-faced geostrategic developments may work as the force multiplier for India to take a central position in the global supply chains. The ongoing Indian presidency of the G20, with five more months remaining, should help India raise its stake in the global supply chain order.
Yet, it’s worthwhile to look back at the challenges which were littered all along the journey of reforms that Prime Minister Narendra Modi ensured India undertook despite strident opposition from all quarters. The rollout of the GST was decried by the Opposition. The Congress egged on the Opposition parties to fan several ill-informed notions about the GST rollout.
It was stated that States will lose out in revenue, and the GST rollout was an attack on the federal structure and spirit of the country. Within the stipulated time frame of the GST compensation regime for States on account of revenue losses, the rate of the growth of the collections went beyond the 14 per cent threshold set for the compensations.
In fact, the GST Council has emerged as a consensus-based body with the best of the federal spirit driving the functioning of the whole architecture. Time has indeed vindicated the Modi Government for staying firm with the GST rollout. Also, a democratic spirit guided the evolution of the GST architecture, as the window to allow feedback and suggestions for improvement was also kept open.
Reforms alone can guide India to the path of prosperity. Digital India has also been India’s remarkable achievement in recent years, which is being documented the world over for the depth of democratisation of the digital payment system. Now even hawkers have embraced the digital mode of payment. People are even paying for samosa and chai with UPI. This mainstreaming of the informal economy has the strength to take India on a fast lane towards becoming a developed country in the near future. The UPI transactions in March month went past the Rs 14-lakh crore mark.
The digital payment system adoption by the stakeholders of the economy has not only improved the ease of doing business but opened new avenues for several enterprising individuals to walk on the path of self-employment.
The Government e-Market (GeM) reported over Rs 2 lakh crore of transactions in 2022-23. This technological intervention in democratising government procurement in a transparent manner at the lowest cost, with the guarantee that any product sold here could not be sold anywhere at a lower cost, has been a remarkable reform in the way government departments function. Reforms with the help of technology adoption have weeded out the scope of corruption and human error.
The success of the indirect tax reforms must be carried to the direct taxes as well. There is no denying the fact that the direct tax base needs expansion. This can be done on the basis of some bold steps. Some measures have already been taken with the unveiling of the new direct tax regime which incentivises taxpayers not availing the benefits of exemptions.
But, still, there exist two systems for direct taxation. This may not be tenable in the long run. To ensure that India moves fast on an exemption-less direct taxation regime, there must remain only one option for the taxpayers. Empirical data shows that lower tax rates bring more revenues and result in greater compliance on the part of people.
Thus, it will be worthwhile to explore if direct taxes could further be lowered and the exemptions done away with, heralding a single system for the taxpayers. This is not an era of forcing people to buy savings products just to save taxes. Tax-saving financial products should not be a compulsion but a choice for the people in the country. This is doable, and must urgently be done.
At the same time, policymakers must take a hard look at the list of exempted categories from the direct taxation net. The people earning income above a particular and reasonable threshold must be part of the direct tax architecture to make their contributions to the development of the nation and also to make available world-class public education and health infrastructure all across the country. This calls for a firm political resolve to deal with the vested interests that always seek to block reforms in the country.
Reforms in the next few years may bring tax buoyancy to fuel an accelerated march of India towards self-reliance in a host of areas such as defence, while also spurring the clean energy transition at a faster pace.
(Author is a policy analyst)
