GST buoyancy expected to decline, but will stay above one, says CBIC Chairman

GST buoyancy to decline but stay above 1

Tax buoyancy from Goods and Services Tax is expected to come down in the coming years, but will stay above one, said Sanjay Kumar Agarwal, Chairman, Central Board of Indirect Taxes & Customs (CBIC), in a post-Budget interaction with Moneycontrol.

“The compliance levels are going up, tax buoyancy cannot remain that high,” Agarwal noted.

The ministry has set a target of increasing GST collections by 11 percent in FY25, against a GDP growth of 10.5 percent.

Growth in GST collections had declined to a three-year low of 7.7 percent in June, compared to 10 percent in the previous month.

“GST, after seven years, has fairly stabilised and that is reflected in the revenue that is coming from it,” Agarwal said.

In FY24, GST collection had grown 12.7 percent as per provisional account released by the government, while nominal growth was muted at 9.6 percent.

Commenting on duty reduction on gold, the CBIC chairman noted that the move is also expected to curb gold smuggling.

“There was a huge difference in international and domestic prices, which had created a margin for smuggling. If that is reduced, then smuggling may not remain a profitable business,” he added.

The Budget had announced a reduction in customs duty on gold and silver to 6 percent from 15 percent earlier.

Finance Minister Nirmala Sitharaman in her Budget speech also changed the rate structure of certain products like critical minerals.

The CBIC chairman noted that the changes were initiated to give impetus to domestic manufacturing, which, in turn, will boost employment generation.

On the issue of duty inversion, Agarwal said that duty inversions need to be studied carefully and, on a case-by-case basis, as in some cases the value of inputs can be negligible.

“At times, inputs, which are used for manufacturing of any finished goods may have an inverted duty structure, but its contribution in the total value may be very low,” he highlighted.