Record revenues can smoothen upcoming Centre-State reform parleys
If overall GST collections sustain around April levels, a dialogue with States on their pending dues along with those that will accrue from now till June, could become less thorny. But the conversation needs to begin soon. The GST Council, which has not met properly since September 2021, must be convened at the earliest. Higher tax inflows backed by improved compliance, should give the Council more flexibility to approach the impending rationalisation of the GST rate slabs, beyond a mere scramble to fill coffers and factor in larger socio-economic considerations. The Centre, which called the April inflows a sign of ‘faster recovery’, must also state whether these revenue levels warrant a rethink of its concern that the effective GST tax rate had slipped from the revenue-neutral rate envisaged at its launch. A clear acknowledgement is also needed that the higher revenues are not solely driven by a rebound in economic activity. Persistently higher input costs facing producers for a year and their accelerating pass-through to consumers, seen in higher retail inflation, have contributed too, along with tighter input credit norms introduced in the Union Budget. That revenue growth from goods imports has outpaced domestic transactions significantly in recent months, also suggests India’s consumption story is yet to fully resurface. Urgent policy action is needed to rein in the inflation rally and bolster consumer sentiment, so as not to sink hopes of more investments, faster growth and even greater revenues.
SOURCE:https://www.thehindu.com/opinion/editorial/gst-signals/article65376087.ece