Editorial of the Day (3rd Apr): GST-A Reform Window

Context: Net direct tax collections rose by 19.9% by mid-March, reaching 97% of revised budget targets.

Robust GST Performance

Goods and Services Tax (GST) collection reached ₹20.18 lakh crore, a significant achievement.
Gross GST revenue in March (transactions from February) crossed ₹1.78 lakh crore, the second-highest ever (except for April 2023 with year-end compliances).
Average monthly collections grew 11.6% in FY24 to over ₹1.68 lakh crore, establishing a new revenue baseline.
Central GST collections surpassed revised budget estimates, potentially leading to higher targets in the upcoming budget (FY25).

Increased tax demands for past years.
Crackdown on tax evasion practices like fake invoices and fraudulent credits.
The uptick in net GST revenue and domestic transactions (17.6% growth) suggests increased economic activity in the last quarter of FY24.

Areas for Improvement:

A 5% decline in GST on imported goods during March might indicate a decrease in discretionary spending.

Rationalise the complex structure with multiple tax rates.
Expand GST to include currently exempted items like electricity and petroleum products.
Reduce high levies on essential products like cement and insurance.

This cess collected ₹1.44 lakh crore in FY24, used to repay pandemic-era borrowings for state compensation.
Potential for an earlier wind down than the extended deadline of March 2026.
Resistance is needed against replacing it with new levies, except for demerit goods like tobacco.
A high GST rate (over 40%) on hybrid vehicles discourages green goals and consumer spending.