Uncertain GST revenue data poses fresh challenges for GDP estimates

The Goods and Services Tax (GST) regime, which kicked in from July 1, has posed fresh a new challenge for calculating India’s Gross Domestic Product (GDP), Chief Statistician TCA Anant said on Thursday.

Latest data released on Thursday showed that India’s real GDP grew at 6.3 percent in the quarter-ended September, rebounding from a three-year low of 5.7 percent in the previous quarter as companies shrugged off inventory disruptions caused by GST’s rollout.

India has moved to a gross value added (GVA)-based accounting system for national accounts and GDP since 2014.

GST has consolidated a welter of local and central levies such as value added tax, excise and service tax into a single levy. This has made inter-period tax collections difficult to compare.

GDP, by definition, is the total value of goods and services produced in the country. GVA, on other hand, is GDP minus taxes. It serves as a more realistic proxy to measure changes in the aggregate value seen through the prism of cost of production.

Chief Statistician TCA Anant said that introduction of GST in GDP calculation posed a ‘statistical challenge’ for the Central Statistics office (CSO).

“In a normal year, businesses are conversant with their tax structure and liability…most businesses know their liability and pay in time. So the collection reflects what is collected during a quarter. (With) Introduction of GST there is uncertainty faced by number of taxpayers in computing tax liability,” Anant said.

GST returns have been marred by procedural irritants and technical glitches with thousands of traders still not being able to file final invoices that the new system requires. Tax collections have not been robust, although this could pick up a final set of returns are collated in a few months.

“Tax payment due in a particular period was not being paid on time…tax data for relevant period is being updated even today… this created a challenge for us”, he said.

GDP growth figures for the four quarters beginning July-September 2017 may go through major revisions after the national accounts are updated later, factoring in actual GST tax collection numbers.

While statisticians should be able to factor in this data from the January-March 2018 quarter, it will still have to rely on approximations for growth comparisons, until full year indirect tax collection estimates are available.


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