Early signs of tax base expansion post-GST: Economic Survey

New Delhi: The Economic Survey on Friday said implementation of GST has shown early signs of expansion in tax base and called for inclusion of education, healthcare electricity, real estate and alcohol under the new tax regime.

The Economic Survey Volume 2, authored by Chief economic Advisor Arvind Subramanian, however, decried excluding health and education from the purview of GST and lamented a "low" 3 percent tax on gold and jewellery saying these items are consumed by the "very rich".

The Survey, tabled in the Lok Sabha, said availability of a common set of data to both the Centre and states post-GST would make direct tax collections more effective.

"There are early signs of tax base expansion..Preliminary estimates point to potentially large increases in the tax base as a consequence," the Survey said.

On top of the over 71 lakh excise, service tax and VAT payers, who have migrated to the GST regime, there are over 15 lakh entities who have taken fresh registrations under the new indirect tax regime -- which has unified over 17 different taxes.

The Survey said bringing electricity under the GST framework would improve the competitiveness of Indian industry because taxes on power get embedded in manufacturers' costs, and can be claimed back as input tax credit.

Inclusion of land and real estate and alcohol in GST will improve transparency and reduce corruption.

"Keeping health and education completely out is inconsistent with equity because these are services consumed disproportionately by the rich. Moreover, the tax on gold and jewellery products items -- that are disproportionately consumed by the very rich - at 3 percent is still low," the Survey said.

The Subramanian-led panel on GST had earlier in 2015 recommended a 4-6 percent tax on gold.

The Survey said that the launch of GST represents an historic economic and political achievement, "unprecedented" in Indian tax and economic reforms.

Goods and Services Tax (GST), rolled out from July 1, has brought in uniformity or the principle of "one good, one tax" all over the country.

"So relative to the past, there is now uniformity rather than multiplicity as well as considerably less complexity," it said.

The Survey said that with GST implementation even small businesses and traders have come into the formal tax net and the impact of this on direct tax collection could be substantial.

"In the past, the Centre had little data on small manufacturers and consumption, while states had little data on the activities of local firms outside their borders. Under the GST, there will be seamless flow and availability of a common set of data to both the Centre and states, making direct tax collections more effective," it said.

It said that GST would "dramatically reduce" logistics cost and give a boost to inter-state trade in the country.