August 21, 2019

Serious cash crunch due to an underperforming GST?

..............What is driving this slowdown of the Union government: poor tax collection. The Centre’s share of taxes was 7.3% of the Indian GDP in 2013-’14. By 2018-’19 that number had dipped to 6.9%.

Like in the case of expenditure, there is also the problem of unpredictability. The estimated central government share of taxes as a percentage of GDP at the start of 2018-’19 was 7.9%. But it fell by a whole percentage point when actual taxes were counted up at the end of the financial year. This gap between estimates and actuals was the highest ever in India’s tax history and sent alarm bells ringing in the Union government.

The largest ever gap between estimates and actuals points to a fairly disconcerting state of affairs. How did things come to such a pass?

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