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Key Points

The Bank of Baroda report highlights GST's success in expanding India's taxpayer base and reducing evasion over eight years. Tax buoyancy has improved significantly, now growing in line with economic activity. The system provides accurate tracking of consumption patterns and business performance. Enhanced compliance measures have made tax evasion increasingly difficult under GST.

Key Points: GST Boosts Taxpayers and Cuts Evasion Over 8 Years Says BoB Report

  • GST tax buoyancy rose from 0.6 in FY20 to 1 in FY25
  • Strong 0.97 correlation between GST and economic activity
  • Wider tax base improves revenue and economic tracking
  • Improved compliance framework reduces tax evasion
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GST not only increased tax payers base but also lowered tax evasion over past 8 years: BoB Report

Bank of Baroda report reveals GST expanded taxpayer base and reduced evasion, with tax buoyancy improving to 1 in FY25.

"Further tax buoyancy of GST has significantly improved... indicating not only increase in tax payer base but also lower tax evasion – Bank of Baroda Report"

New Delhi, July 25

After the implementation of Goods and Services Tax (GST) in the country, the tax payers base has increased and tax evasion reduced, according to a research report by Bank of Baroda.

The report highlighted that GST collections are closely linked with nominal consumption and net sales of companies.

It stated "Further tax buoyancy of GST has also significantly improved from the early years of GST implementation to FY25 now. This indicates not only increase in tax payer base but also lower tax evasion".

The report pointed out that the tax buoyancy of GST has improved significantly from the early years of its rollout.

Tax buoyancy refers to how responsive tax revenue is to changes in economic activity. In FY20, GST's tax buoyancy stood at 0.6, meaning it was less responsive to economic growth. However, this has improved to 1 in FY25, indicating that GST collections now grow in line with the economy.

When the trends in GST collections were mapped against private final consumption expenditure (PFCE) and net sales of 2,023 companies (excluding those in the banking and finance sector), a strong correlation of 0.97 was observed.

This showed that GST receipts are highly aligned with economic activities like consumption and business performance.

The report also stated that a broad tax base helps the government not just in increasing revenue but also in tracking economic trends accurately. Since GST covers most businesses, from small shops to large companies, it provides a more accurate picture of India's consumption patterns.

For example, GST collections for the quarter ending June 2025 showed an 11.8 per cent growth, signalling that nominal PFCE growth for that quarter would likely be around the same level.

In addition to expanding the tax net, the report highlights that the GST framework has been designed to ensure better compliance. With the combined efforts of central and state authorities, tax evasion has become increasingly difficult.

As a result, GST's buoyancy with respect to nominal consumption has also improved, rising from 0.4 in FY20 to 0.8 in FY25.

Overall, the report concluded that GST has helped India build a more efficient and responsive tax system that not only boosts revenue but also aligns well with the country's economic activity.

- ANI

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Reader Comments

S
Shreya B
While the numbers look impressive, I wish they would reduce the GST rates on essential items. Many middle-class families are still struggling with high prices. The system may be working better, but is it working for common people?
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Arjun K
As a CA, I've seen firsthand how GST has reduced tax evasion. The input tax credit system forces businesses to be transparent. Yes, there were initial hiccups, but now it's one of the most effective reforms for formalizing India's economy. #GSTSuccessStory
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Priya S
The report is good but what about the compliance burden on small businesses? My kirana store spends ₹5000/month just to hire someone to file returns. The government should provide more support to micro businesses in this digital system.
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Vikram M
GST has definitely made India more business-friendly for foreign investors. The unified tax system removes so many state-level complications. This is why we're seeing record FDI inflows! 🇮🇳
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Kavya N
The correlation with economic activity is impressive, but I wonder how much of this is due to better compliance vs actual economic growth? The report doesn't separate these factors clearly. Still, good to see positive trends after initial struggles.
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Nikhil C

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