Economic Survey: The GST ‘Feast Of Findings’

The distribution of the GST base among the states is closely linked to the size of their economies, says the survey.

A “feast of findings” is how Chief Economic Adviser Arvind Subramanian describes the insights yielded by the implementation of Goods and Service Tax. Noting that there has been a fifty percent increase in the number of indirect taxpayers, the Economic Survey 2018 points out that “many have voluntarily chosen to be part of the GST, especially small enterprises that buy from large enterprises and want to avail themselves of input tax credits”.

Other notable facts revealed by GST data include:

• The distribution of the GST base among the states is closely linked to the size of their economies, allaying fears of major producing states that the shift to the new system would undermine their tax collections.
• Data on the international exports of states (the first in India’s history) suggests a strong correlation between export performance and states’ standard of living.
• India’s internal trade is about 60 percent of GDP, even greater than estimated in last year’s Survey and comparing very favourably with other large countries.
• India’s formal sector, especially formal non-farm payroll, is substantially greater than currently believed. Formality defined in terms of social security provision yields an estimate of formal sector payroll of about 31 percent of the non-agricultural work force; formality defined in terms of being part of the GST net suggests a formal sector payroll share of 53 percent.
• Similarly, the size of the formal sector (defined here as being either in the social security or GST net) is 13 percent of total firms in the private non-agriculture sector but 93 percent of their total turnover.

(This article was originally published on BloombergQuint)