One can argue that data is the nectar that policymakers must drink and digest to make good policy. The recent magisterial study by Arvind Subramanian and his team has brought out the veracity of this assertion on the seventh anniversary of the introduction of the goods and services tax (GST).
One of the findings is that GST revenue performance has been overstated because of considering gross revenues instead of net revenues, given the significant proportion of integrated GST (IGST) refunds paid to exporters (0.7 per cent to 0.8 per cent of gross domestic product, or GDP). Therefore, the GST-toGDP ratio reached the pre-GST level of 6.1 per cent only in 2023-24. This is a sobering truth. If this had been known earlier, perhaps the GST rate reduction exercise in 2017-2018 and 2018-2019 would have been more tempered, with rate cuts balanced by increases in certain items to maintain revenue neutrality.
The study results bring out one important fact: We have not utilised the rich vein of GST data. It is time now to open this up to all private research outfits and public finance groups in our universities. What are the important areas of research with implications for policymaking?
First, there is the important area of inter-state trade. When GST implementation was debated, it was claimed that by the abolition of entry tax and octroi, the so-called "border taxes", inter-state trade would increase. The Economist in a recent special report said that inter-state trade as a proportion of GDP rose from 23 per cent to 31 per cent between 2017 and 2021. We need to dive deep into this claim using IGST data and other proxy datasets. It is important to know whether the Indian market has expanded post-GST, and which states have gained.
This story is from the July 09, 2024 edition of Business Standard.
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This story is from the July 09, 2024 edition of Business Standard.
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