The impact of demonetisaion and the roll-out of the Goods and Services Tax (GST) will result into increase of 30 basis points (bps) each in 2018-19 and 2019-20 in the tax-GDP ratio. The government while tabling the Medium-Term Expenditure Framework (MTEF) Statement in the Lok Sabha, said that the tax-GDP ratio will increase to 11.9 percent by 2019-20, while the gross tax-GDP ratio in 2017-18 is estimated to be around 11.3 percent.
However, the report noted that in the current fiscal, the tax-GDP ratio is expected to see no increase over that of 2016-17 and remain at 11.3 percent. Further elaborating that it said that it is felt that any shocks to tax collections due to the introduction of GST will be absorbed in the current FY and, hence, the tax-GDP ratio will remain at the level of 2016-17.
The finance ministry has projected that in the medium term tax revenues will show the growth anticipated during the presentation of the Budget. Goods and Services Tax was rolled out from July 1 and it is estimated that the new indirect tax regime would add to revenues and boost GDP by about 2 percent. Besides, the demonetisation of Rs 500 and Rs 1,000 notes have brought an additional over 1 crore people in the tax net.