Full benefits of GST only from 2020-21: Interim Budget

Surabhi Mumbai | Updated on February 03, 2019 Published on February 03, 2019

The Interim Budget 2019-20 may have kept an ambitious growth target for the Goods and Services Tax for next fiscal, but it doesn’t expect benefits from the indirect tax regime to flow in until 2020-21.

“Accrual of the full benefit of GST reforms and revenues is expected to take some more time and, therefore, the stabilisation phase is expected to continue in 2019-20 too,” the Budget documents have noted, adding that the full benefits of GST reforms should start accruing from 2020-21 and completely stabilise thereafter to ensure sustainable fiscal path.

Noting that 2018-19 was the first full year of implementation of GST with numerous rate changes, the Budget has said the full potential of the tax system would be realised only after the transition period is over.

“These rate changes have reduced the tax burden on consumers and, in the long run, will lead to improvement in compliance, reduce classification disputes and make GST more equitable,” it said, while Finance Minister Piyush Goyal had in the Budget speech pointed out that the GST mop-up increased to over ₹1 lakh crore in January.

The Interim Budget has lowered the target for revenue proceeds from GST by ₹1 lakh crore to ₹7.44 lakh crore to ₹6.44 lakh crore in 2018-19 in the Revised Estimates. For 2019-20, it expects the mop up from GST to increase by 18.2 per cent over the RE to ₹7.61 lakh crore but compared to the BE, the increase is just of 2.3 per cent.

Revenue collection

However, despite the expectation that GST would fully stabilise by 2020-21, the Budget document has said that the revenue collection would be “slightly muted” from then on. “Whereas direct taxes are expected to show a growth rate of 14.9 per cent and 15.3 per cent, the growth rate in indirect taxes is expected to be slightly muted at 8.4 and 11.1 per cent in the years 2020-21 and 2021-22 respectively,” it said, adding that among the indirect taxes, the growth rates of GST are expected to remain roughly at the rate of growth of the economy.

Meanwhile, experts have called the growth projection in GST mop-up for 2019-20 a fairly ambitious one.

“A closer look at the estimate of various tax revenue components does not inspire confidence. The GST collection growth in 2019-20 is estimated at 18.2 per cent, whereas the 2018-19 Revised Estimate growth pegs it at 9.1 per cent. This is a tall order,” said Devendra Kumar Pant, Chief Economist and Senior Director (Head – Public Finance), India Ratings.

In a research report, Radhika Rao, Economist, DBS Group, has noted that the recent reduction in GST rates, higher thresholds and wider umbrella of tax payers under the composition scheme are also likely to slow collections further in 2019-20.

Published on February 03, 2019

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.