GST collection rises due to effective tax compliance

File photo AFP

For railways, the asset monetisation programme is designed to not only raise resources but also modernise key railway stations through the public-private partnership model.

By H. P. Ranina

Published: Sat 28 May 2022, 11:51 PM

Last updated: Sun 29 May 2022, 6:25 AM

Question: India is relying heavily on tax revenues for meeting capital expenditure on infrastructure projects. The Goods & Services Tax has brought in a bonanza for the Government. Does it mean that there will be a higher burden of taxes in future as well?

GST collection has gone up on account of measures introduced for more effective tax compliance as well as on account of a perceptible growth in the Indian economy. However, tax resources cannot entirely fund the capital expenditure required for infrastructure projects. Therefore, the government has rightly formulated a policy for asset monetisation. For the current financial year 2022-23, the target figure is pegged at ₹1.62 trillion.

Targets for resource mobilisation through asset monetisation have been fixed for different sectors like roads, railways, power, oil and gas, telecom, warehousing, mining, aviation, ports, and sports stadia. For railways, the asset monetisation programme is designed to not only raise resources but also modernise key railway stations through the public-private partnership model. Substantial resources have been raised by privatisation of collieries and mines. This sector has been extremely successful in raising resources. The National Asset Monetisation Pipeline has a targeted figure of ₹6 trillion to be raised during the financial years 2021-22 to 2024-25.

Crypto investors have lost around $300 billion in the value of their investments during the last few days. Stablecoins have been adversely affected. Many investors are utterly confused. Is there any explanation for this?

In the world of crypto currencies, the so-called stablecoins are meant to be relatively safe. These are digital tokens which are pegged to currencies like the U.S. Dollar. They are designed for such volatility as seen in traditional currencies which have smaller price swings than those of bitcoin. Stablecoins are mostly used to facilitate trading in other digital assets. However, these stablecoins are not backed by cash or treasuries but derive the dollar peg from algorithms.

A few days ago the algorithm failed to maintain the peg for reasons which are still not known. Since crypto assets are unregulated, most investors have preferred less risky assets and offloaded their investments in stablecoins and other crypto assets. Central banks have consistently warned investors to refrain from investing in crypto currencies and other assets. Further, countries like India have framed legislation to disallow setting off of losses from such transactions against any taxable income.

As inflation is raging in most parts of the world and foreign exchange reserves are dwindling to precarious levels in some of the South Asian countries, will India be able to survive the critical phase which the global economy is going through?

In a reversal of the accommodative monetary stance of the Reserve Bank of India during the past few months, the repo rate has been increased by 40 basis points and the cash reserve ratio by 50 basis points earlier this month. This decisive action was taken with a view to tame inflation which had increased beyond expectations to 7 per cent and global commodity prices touched historic levels. Another factor which exacerbated inflationary pressures was the revision in electricity tariffs and, of course, the unprecedented war in Eastern Europe.

Therefore, the Reserve Bank took timely action with a view to forestall harsh action in the near future. Some financial analysts believe that a further increase in rates may become necessary in the coming weeks and that the front-loading of rate hikes is required to prevent the real rate from becoming negative. As far as foreign exchanges reserves in India are concerned, the reserves of $596 billion as on 6th May are enough to finance ten months of projected imports. The Reserve Bank is watching the situation closely as emerging economies face risks of capital outflows and the continuing pandemic in China and elsewhere may have a deleterious effect on the global economy.

H. P. Ranina is a practicing lawyer, specialising in tax and exchange management laws of India.