The government has this time to have an increased Tax to GDP ratio by 12 percent in coming two years by FY20. For this, the authorities will be having benefits of newly implemented GST and the thorough cross checking of accounts with their taxpayers.
In this, there will be expected higher revenue for the government which will target to expand the capital spending power of the government. All this is speculated to bring a fiscal deficit of around 3 percent of GDP, which is quite sustainable. Along with it, it is also thought that it will bring revenue deficit to a lower 1.4 percent of the GDP by the timeline of FY20.
Overall it is expected to draw some results through the implementation of goods and service tax as according to the medium-term expenditure framework which was recently released by the government stated that tax to GDP ratio has a hike of around 30 basis points in FY19 and FY20 at 11.6 percent and 11.9 percent respectively.
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It is also assured by the tax department and central government that any changes in tax revenue will be taken care in this current fiscal. The statement mentioned that, “going forward in the years 2018-19 and 2019-20, the gains from the expansion of the tax base due to the introduction of GST and the increased surveillance post demonetisation will ensure that tax-GDP ratio will increase by 30 basis points in each of the above FYs in question.”
There will be an ease for the government to spend some extra revenues on the capital asset creation in the due time. This time the share will be having an extra 0.6 percent of expenditure to spend upon the acquiring of capital assets. The government has also gained some benefits from the lowered rate of interest which is helping the government to save some interest. In the statement of the report it said that “If this trend continues, it will have an impact not only on the government expenditure but will also have a salutary impact on the investment decisions of economic agents in the country.”
