Indirect taxpayer numbers jump 50% on GST

The government will easily bridge link between revenue and spending plan in upcoming Budget as the economic survey revealed on Monday that demonetization and Goods and service tax (GST) have added 18 lakh new taxpayers. All depends only if the new taxpayers get translated into revenue.

Arvind Subramaniam, chief economic advisor, outlined the country's economic potential for the Budget and fiscal year in a presentation of Economic Survey.

"At first blush, there does seem to have been a substantial increase in the number of new taxpayers," the Survey said.

The Economic Survey shows 9.8 million unique GST registrants added till December 2017, slightly more than the total indirect tax registrants under the old system. However, the survey maintained, "The two numbers are not comparable: registrants in the old system were not unique since many taxpayers were registered under several taxes."

Adjusting the base for double and triple counting, "the GST has increased the number of unique indirect taxpayers by more than 50% substantial 3.4 million," it said.

Former Chairman of CBEC, an apex body of earlier indirect tax, S D Mazumdar, said, "While the number of taxpayers would have increased in GST regime in respect of manufacturers because of lowering of the threshold from Rs 1.50 crore of excise regime to meagre Rs 20 lakh, the number would have decreased for state VAT payers and service taxpayers in GST regime for whom the threshold has been increased from Rs 5 lakh and Rs 10 lakh, respectively, to Rs 20 lakh."

He said generally it's the large enterprises who buy raw materials and components from the Small ones who are now in any case paying GST because of lowering of threshold.

The survey found that out of total turnover, business-to-consumer (B2C) transactions account for 17%, whereas the majority of transactions are business-to-business (B2B) and exports segments, which account for 30-34%. "As for the new filers, since their business to consumer transactions is said to be only 17%, their contribution to the revenue kitty would be less. The business to business transactions don't add much to revenue because of availability of input tax credit, said a former tax official.

Economic Survey also claims "There are about 1.7 million registrants who were below the threshold limit (and hence not obliged to register) who nevertheless chose to do so. Indeed, out of the total estimated 71 million non-agriculture enterprises, it is estimated that around 13% are registered in the GST."

Current data suggest that the GST tax base (excluding exports) is Rs 65-70 lakh crore, broadly similar to these two previous estimates. Based on the average collections in the initial few months, the implied weighted average collection rate (incidence) is about 15.6%.

Ranen Banerjee, partner and leader - public finance and economics, PwC India, said, "The growth expectation in the next fiscal has been pegged at 7-7.5%. There is, therefore, cautiousness on the upsides expected from GST on the economy in the next fiscal too."

Demonetization, which temporarily "reduced demand and hampered production", also boosted taxpayers to share their due tax with the government. Survey data showed one crore new taxpayers filed tax returns between November 2016 and November 2017, compared with 6.2 million during the same period of last six years.

"The level of tax filers by November 2017 was 31% greater than what this trend would suggest, a statistically significant difference. This translates roughly into about 1.8 million additional taxpayers due to demonetization-cum-GST, representing 3% of existing taxpayers," the survey said.

During the first eight months of 2017-18, tax collections are reasonably on track; and the robust progress in disinvestment compensates to a great extent for the sluggish pace in non-tax revenue, it said. Fiscal deficit overshot target by 12% till November, which is likely to normalise as the year progresses.

The survey also noted that confidence on direct taxes in India seems to be declining, a trend that will be reinforced if the GST proves to be a buoyant source of revenue.