The consumption tax was expected to bring in an anti-evasive tax regime, but there are numerous cases of bogus billings, tax evasion
and fake invoicing, according to tax consultancy and auditing firm PricewaterhouseCoopers LLP. “I wouldn’t expect this kind of reform and tax regime to become stable quickly,” Pratik Jain, a partner at PwC India, said.
The government’s total tax revenue in the last financial year ended March fell short of target by Rs 1.7 trillion ($24 billion), according to provisional numbers. That’s due in part to GST collection trailing monthly target for most of the year.
A revenue miss again will put the fiscal deficit goal of 3.3 per cent of GDP at risk, and limit the government’s ability to spend on infrastructure and welfare programs.
The finance ministry expected GST to help boost GDP growth by as much as two percentage points. Despite lowering of the GST rate to revive consumption, economic expansion has slowed, coming in at 5.8 per cent for the quarter ended March.
“This elephant has to move fast,” said Sacchidananda Mukherjee, a professor at National Institute of Public Finance and Policy in New Delhi. “It will take time compared to developed countries where they have a good IT platform and are more homogeneous.”