Revenues from the Goods and Services Tax (GST), which completes seven years at the end of this month, hit a record high of ₹2.1 lakh crore in April that typically sees higher inflows due to a year-end compliance rush. Receipts in May, for transactions undertaken in April, were the fifth highest ever at ₹1,72,739 crore, rising almost 10% from a year ago, compared with a 12.4% uptick in the previous month. This was the slowest rise since July 2021 when the second COVID-19 wave had dented economic activity. In the nearly three years since then, GST revenues have generally grown at least 11%. Compared with the average monthly receipts of ₹1.68 lakh crore in 2023-24, taxes pertaining to the first month of this fiscal are 3% higher. Although gross revenues from domestic transactions grew 15.3%, accelerating from a 13.4% rise a month earlier, revenues from goods imports dipped for the second time in three months. Domestic revenue growth has also been uneven across States, with five recording a decline in May, and eight growing far slower than the national average. However, broader worries about GST revenues being underwhelming, voiced by the Union Finance Minister at a GST Council meeting in late 2021, have now receded.
This is, therefore, an opportune time for the Council, which is meeting this Saturday, to press the pedal on its pending reform agenda to make it a truly Good and Simple Tax as originally envisaged. Meeting for the first time since last October, the Council may have much routine work on its plate, including clarifications related to, and reviews of, past decisions such as the 28% levy on online games and casinos. However, it is hoped the Council will also find time for bigger things such as reviving the plan to rationalise GST’s complex, multiple-rate structure. A ministerial group, tasked with this agenda since 2021, must be asked to restart its work expeditiously. A new rate structure might also entail lower levies on items such as cement and insurance, for instance. A road map is also needed to bring excluded items such as electricity, natural gas, and petroleum products into the GST net to ensure businesses can avail credits for these inputs. Along with easing compliances for smaller firms as promised in the Bharatiya Janata Party’s election manifesto, there is room for simplifying the system for all businesses, including large ones which are compelled to register in each State and face varying compliance diktats. Not all of this can be discussed in one go. So, it is most critical that the Council, which is usually expected to meet every quarter but has been convened just six times since 2022, resolves to meet more often.