The State Government has managed to grow Goods-and-Services-Tax (GST) collections in the last few months, but the challenge would be to continue this momentum in the whole of 2019 and also in the coming years. GST collections of the government grew by 14.7% in January, 28.6% in February, 14.4% in March and 18.2% in April. Interestingly, Goa’s GST collections in April grew at a much faster rate than India’s GST collections, which grew at 10%. So far so good, but here is the challenge!
The GST Council under the Central Government went on to reduce tax rate on a number of products and services throughout 2018. Some said it was to rationalise the tax structure, while others said that it was pure vote-bank politics. Whatever it was, the State Government in Goa had struggled to grow its tax collections between July 2017 and December 2018. Under GST regime, the decision to change most tax rates can be only taken by the GST Council. Various state governments in India can only take decisions about tax rates on certain products like alcohol and petroleum.
Now that the scope to change tax rates is not within the purview of the State Government for most products, the challenge is how to maintain sustainable growth momentum in overall tax collections. If GST Council decides to yet again reduce tax rates, it will be tough for the State Government to increase its tax collections. At the same time, the government will have to ensure that it does not randomly increase tax on products coming under its purview.
For example: In March 2018, the government increased the alcohol license fees for restaurant and bar owners drastically. That move was severely criticised by restaurant owners. The government will have to ensure that it maintains a stable tax regime and also grow its tax collections, which will be a tightrope to walk on.
By the end of May, it will be clear which party will form the government at the Centre. The new Central Government, assuming it is stable, will have much lesser pressure to reduce tax rates than the previous government. This is because it will have five more years to go for elections. So, there is hope that tax rates will remain stable for few years at least. For its part, the State Government will have to be really harsh on those not paying GST. For example: the organizers of Sunburn Klassique have not paid GST yet even though the due date has long gone by. The government will have to take a policy decision whether to allow such people to do another event in Goa. Such discipline will have to be brought in. Otherwise, people will feel government is lenient on those who don’t pay GST.
