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Government estimates annual GST rationalisation loss of Rs 48,000 crore in short term
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Previous fiscal GST collections were Rs 10.6 lakh crore, making loss insignificant
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GST rates rationalised to two slabs: 5% and 18%, effective from 22 September
The recent rationalisation of Goods And Services Tax rates is unlikely to pose a fiscal burden on the government, ratings firm Crisil said.
In its latest report, the ratings firm said the government has estimated a net loss of an annualised Rs 48,000 crore in the short term on account of GST rationalisation.
The total GST collections in the previous fiscal were Rs 10.6 lakh crore.
Hence, the loss does not seem significant, the report said.
The GST Council recently decided to rationalise the tax rates and have a two-rate structure of 5% and 18%. The revision, to be effective from Sept. 22, will reduce the prices of a large number of products and services.
The GST simplification from four to two slabs can bring more goods and services under the formal net, which would gradually support tax buoyancy over the medium term, the Crisil report said.
Before the rationalisation of the GST rates, the majority (70% to 75%) of the revenue came from the 18% slab, it said.
Only 5% to 6% of revenue came from the 12% tax rate slab, and 13% to 15% from the 28% slab.
The ratings firm said that reducing tax rates on items from 12% may not render significant revenue loss.
Rates are unchanged on several fast-growing services like mobile tariffs.
New services such as e-commerce delivery were brought under the GST ambit and will be taxed at 18%.
An increase in disposable incomes due to benefits on certain mass consumption items could further drive up their demand and tax collections, the report said.
Producers passing tax changes onto the consumers is a key factor which would also determine the spending pattern of the latter, it added.
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