GST revenues for March 2021, collected in April 2021, have shot up to a record high of Rs 1,41,384 crore —14% higher than that of the previous month even in the wake up of the second wave of the Corona pandemic.
Thanks to GST’s foolproof mechanism that has led to a spurt in GST collection in the recent past by reducing fraud and decreasing tax evasion. The GST mechanism was introduced and implemented in the Indian economy in the year July 2017. It is a foolproof mechanism that has led to the formalization of the Indian economy. The mechanism of GST has helped in checking the fraud related to payment of tax and has put an end on tax invasion and has introduced more tax compliances thus resulting in the formalization of the economy.
To recall, formalization of the economy simply means bringing more business organizations under the gambit of the regulatory regime of government and tax laws finally leading to soaring tax collections. As per the Economic survey of 2018, formalization simply means firms providing some kind of social security to their employees in addition to businesses forming a part of the tax net.
A minor reason for the upsurge in tax collection can also be attributed to economic recovery to a limited extent — The Indian economy grew by 0.4% in the third quarter. However, consequent to the formalization of the economy, more workers have been enrolling with the Employees Provident Fund. The ability of the economy and government to increase revenue can increase further with the greater formalization of the economy and the broadening of the tax base.
Nearly 1.28 crore taxpayers have been registered under the ambit of GST till May 2, 2021 against 1.12 crore in 2018. The momentum of registration of new taxpayers under GST should rise and is rising also.,
How Tax Evasion is Regulated and checked?
Under the GST mechanism, Tracing the transaction chain right from the supply of raw materials to those individuals who use them as inputs in the entire value chain shall help in reducing tax evasion.
Moreover, Establishing a direct link between the GST database and direct taxes has led to superior collections. And installing data analytics further helps in identifying bogus input tax credit claims.
So it can be concluded that the introduction of GST has spurt tax collection. And a little boost to economic recovery can further increase tax collections and thus Government revenue that is ultimately utilized for social causes and growth & development of India
