New Delhi - The tax-GDP ratio will see an increase of 30 basis points (bps) each in 2018-19 and 2019-20 due to the impact of demonetisaion and the roll-out of the Goods and Services Tax (GST), according to the Medium-Term Expenditure Framework (MTEF) statement tabled in the Lok Sabha on August 10.
"Going forward in the years 2018-19 and 2019-20, the gains from 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 bps in each of these fiscals," the report said.
The tax-GDP ratios are projected to be 11.6% of GDP in 2018-19 and 11.9% of GDP in 2019-20.
However, in the current fiscal, the tax-GDP ratio is expected to see no increase over that of 2016-17 and remain at 11.3%, the report noted.
"In other words, 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," it said.
"It is projected that, in the medium-term, tax revenues will show the growth anticipated during the presentation of the Budget and as estimated in the MTEF Statement," it said.
This is partly a result of the robust tax revenue growth that has been assumed.
In 2017-18 gross tax revenues are estimated to have a growth rate of 12.2%. Assuming a robust tax revenue growth, the statement said in 2018-19 the gross tax revenue is anticipated to grow at the rate of 15% and in 2019-20 at the rate of 14.5%.
"The resulting buoyancy in revenues is anticipated to cushion the interest payment outgo of the government," it said.