GST has led to widening of tax base: finance ministry
19 June 2018
The introduction of GST, has resulted in the formalisation of the economy and consequently information flows would eventually augment not only the indirect tax collections but also Direct Tax collections, the finance ministry said yesterday.
In the past, the centre had little data on small manufacturers and their input consumption because the excise was imposed only at the manufacturing stage while the states had little data on the activities of local firms outside their borders.
Under GST, there will be now seamless flow of availability of common set of data to both the centre and the states making direct and indirect tax collections more effective.
There are early signs of tax base expansion. According to the finance ministry, between June and July 2017, 6.6 lakh new agents, who were previously outside the tax net, had sought GST registration. This is expected to rise consistently as the incentives for formalisation increase.
The entire textile chain has now been brought under tax net, the ministry statement said. Further, a segment of land and real estate transactions has also been brought into the tax net of “works contracts”, referring to housing that is being built. This in turn would allow for greater transparency and formalisation of cement, steel and other sales which earlier tended to be outside the tax net. The formalisation will occur because builders will need documentation of these input purchases to claim tax credit.