The government's move to ban high value currency notes and the roll out of the Goods and Services Tax had come under intense criticism and were blamed for crippling the economy. The government on its part has tried to justify the back-to-back moves, stating it will increase formalisation of the economy and bring more people into the tax net. How far has it been successful?
The Economic Survey 2018 presented in Parliament on Monday throws some light on that front. As far as the indirect tax payers go, according to the Survey, there were 9.8 million unique GST registrants, slightly more than the total indirect tax registrants under the old system.
Adjusting the base (many tax payers in the old system were registered under multiple taxes) for double and triple counting, the Survey points out that GST has increased the number of unique tax payers by 3.4 million, a more than 50 per cent increase.
Maharashtra, Uttar Pradesh, Tamil Nadu and Gujarat are the states with the greatest number of GST registrants. UP and West Bengal have seen large increases in the number of tax registrants compared to the old regime, the survey further states.
The Economic Survey also pointed that of the total turnover of the new tax filers, interestingly, business to consumer (B2C) transactions only accounted 17 per cent, while the bulk of the transactions were business-to-business (B2B) and exports, which accounted for 34 per cent and 30 per cent, respectively.
While the number of unique indirect tax payers is on the up, a similar trend is also visible when it comes to those paying direct taxes.
In India, there are only about 59.3 million individual tax payers (filers and those whose tax was deducted at source in 2015-16),
Since November 2016, when the government banned Rs 500, 1,000 currency notes, 10.1 million new tax filers were added, compared with average of 6.2 million in the preceding six years, according to the Economic Survey.
“Taking seasonality into account it is found that there is a 0.8 per cent monthly trend increase in new tax filers. The level of tax filers by November 2017 was 31 percent greater than what this trend would suggest, a statistically significant difference. This translates roughly into about 1.8 million additional tax payers due to demonetisation-cum-GST, representing 3 per cent of existing taxpayers,” the Survey noted.
The survey further predicts that as many new filers reported an average income close to the income tax threshold of Rs 2.5 lakh, the direct tax revenue over time would “increase robustly” as income growth would push many of these tax payers over the threshold.
