India Economist/Strategist

Ashutosh Datar

Macroeconomics

<p>Over a year into the GST, tax revenues are still running below trend. This is partly due to the tax cuts from the government but also reflects low compliance and the compromised nature of the GST structure. This is not worrying from a GST standpoint as all the changes to the GST (lower rates, easier compliance) are in the right direction and will eventually help tax buoyancy. In the short-run however this has created some risk for the fiscal math this year since tax revenue growth is running significantly below the full year budgeted growth. Government needs to clearly communicate its commitment to fiscal deficit target else the markets will assume fiscal target is flexible.</p>

Over a year into the GST, tax revenues are still running below trend. This is partly due to the tax cuts from the government but also reflects low compliance and the compromised nature of the GST structure. This is not worrying from a GST standpoint as all the changes to the GST (lower rates, easier compliance) are in the right direction and will eventually help tax buoyancy. In the short-run however this has created some risk for the fiscal math this year since tax revenue growth is running significantly below the full year budgeted growth. Government needs to clearly communicate its commitment to fiscal deficit target else the markets will assume fiscal target is flexible.

India: GST Collections Still Below Trend, Incipient Signs of Fiscal Stress