Streamlining Tax Rates to Foster Revenue Momentum: CBIC Chair

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Ahead of the Goods and Services Tax (GST) Board meeting in about a month, Central Board of Indirect Taxes and Customs (CBIC) Chairman Vivek Johri said on Thursday that tariff structure reforms and the rationalization of tax rates are essential to improve revenue. efficiency and buoyancy.

GST collections have been consistently above the GDP growth rate in recent years, with monthly collection in FY22 exceeding Rs 1.25 trillion for six consecutive months till March 2022. Monthly GST collections reached a record high of 1.68 trillion rupees in April (March transactions), broadly reflecting an effective suppression of tax evasion, a sustained shift of activities to the formal sector of the economy and an inflationary impact.

The continued momentum of high GST revenue since July 2021 generated an average gross GST of Rs 1.23 trillion in FY22, up 29% YoY. Johri said monthly GST revenue could average Rs 1.35 trillion in FY23, up 10% from Rs 1.2 trillion reflected in the government budget. year.

Caught between the conflicting goals of raising revenue and controlling runaway inflation, the GST Board could deliberate on calibrated increases in GST rates over the next two years, rather than a one-off reduction in slabs of four currently. at three. Under the GST offset mechanism, state governments are guaranteed annual revenue growth of 14% for the first five years after the tax was launched in July 2017.

“To continue to generate dynamic revenues, we have changed our strategy. One possible way to continue generating revenue is to streamline tax rates to let refunds and credits flow freely, reversing inversions,” Johri said at an event hosted by Ficci.

The government could consider improving revenues through legal and administrative changes, including strengthening enforcement of laws to limit leakages and improving compliance.

“Legal changes have been made to help taxpayers file their returns, which they were unable to do during the peak of Covid, and to improve the tax filing experience. We have improved our electronic invoicing systems, which allows us to build the tax structure and the credit system. The automatic filing population and filing interconnectivity have helped expedite credits and reduce compliance costs for taxpayers,” Johri said.

“By setting up data triangulation with the General Directorate of Foreign Trade and the Income Tax Service, we eliminated risky taxpayers and suspended their registrations. The wrongdoers and those who messed with the system were weeded out,” Johri said.

While GST collections are expected to remain buoyant, he didn’t see much benefit on excise and customs duty revenue in FY23.

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