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Why the monthly GST collections are looked upon as gauge for Economic Growth

By Finserv MARKETS - Nov 21,2019
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The Goods and Services Tax (GST) collections in September 2019 dipped distinctly to a 19-month low. Such a fall in data mirrors the global slowdown, reflected by multiple international reports. Recently, the International Monetary Fund’s World Economic Outlook Report mentioned that there is a synchronised global economic slowdown sparked by a trade slowdown. In the current scenario, where global protectionism and vivid trade acrimony precipitated slowdown fears, it becomes imperative for the government to stir domestic consumption to counter the international setbacks. Such measures will boost local confidence, concomitantly increasing GST collections. In the recent past, owing to the economic slowdown and the credit crunch, businesses have encountered difficulty in complying with GST norms. Businesses are now exploring alternative financing options such as business loans to beat the credit crunch. For instance, the business loans available on Finserv MARKETS can help businesses in investing in new infrastructure, advanced machinery and much, much more, thereby boosting business and increasing GST compliance and collections

Monthly GST collections for Economic Growth

Source: Scroll.in

Monthly GST collections reflect the economic spirit of a nation. It reveals the government’s fiscal discipline and becomes an essential indicator of a country’s financial well being. A few reasons why GST collections are considered as a gauge for economic growth, are:

  • Closes Fiscal Gap

A boost in GST collections, closes the fiscal gap of the government. Fiscal gap or fiscal deficit accounts for the government’s total indebtedness. High fiscal deficit undermines the nation’s international credibility, making overseas loans more expensive.Further, International bodies rate a sovereign nation under certain indicators – of which Fiscal deficit stands as the most critical one. Higher ratings increase investors’ confidence, allowing an influx of investments that aid in the growth of the nation. At times when the government borrows money from the market to fund its fiscal deficit, it becomes difficult for individuals to obtain business loans for their businesses. Such a scenario is termed as “crowding-out effect”. Here utmost transparency is maintained, and minimal documentation for faster processing is given a priority.

  • Higher GST Collection, a proxy of economic development

GST can be considered as an indirect tax collected by the government from various business houses for the associated economic activities – manufacturing or services. In a nutshell, it adequately reflects the economic ecosystem of a nation. Hence, GST collection can be considered as a proxy of economic growth. The government usually legislates favourable policies where businesses can flourish. This becomes a win-win situation, as it also increases GST collections.

  • Higher Consumption:

An increase in monthly GST collection implies that people are buying manufactured products or are consuming services. This automatically contributes towards a nation’s Gross Domestic Product (GDP) that is considered as the most critical indicator, measuring the economy. GDP is the total value of goods produced and services provided in a country over a period of time.

  • Government expenditure:

GST collections become the most important source of money for the government. Various social welfare programmes, centrally aided schemes, subsidies to the poor etc. are possible due to these inflows. India, being a socialist country since its birth, has always stressed on welfare programs to combat poverty and serve the needy. Apart from social expenditure, the government spends this money in various other spheres as well. As the government’s purse fills with these taxes, infrastructure, defence and the international reputation of a nation enhances automatically. Hence, next time you pay your GST, consider it as your contribution to the nation’s growth and development.

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A well-designed GST for India was proposed and finally executed to simplify and rationalise the current indirect tax regime. When the statutory law related to it was being discussed in the parliament, the government accepted that there would be few teething problems in the beginning. Although since its inception, it has done well by eliminating the cascading effect of taxes, it initially was considered as an intractable financial instrument by small-mid entrepreneurs. However, as time progressed, GST is today accepted as a sound financial system, improving the indirect-tax structure of the government. Such external support from the government has aided the honest entrepreneurs, manufacturers and service providers to administer their businesses smoothly. With easy business loans on Finserv MARKETS, it becomes easier for anyone to set-up, build and expand a business under the current GST ecosystem. Moreover, these loans are collateral-free, giving you even more peace of mind. With fast-processing and tailored loan structure, grow your business and become a part of India’s growth.

You can also read about Components of GST.

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