Examine how the government’s efforts to strengthen the accountability and transparency of the budgetary process—such as the Fiscal Responsibility and Budget Management (FRBM) Act, the Union Budget documents’ publication, and the Direct Benefit Transfer (DBT) system-have improved public financial management’s ...
Government Strategies to Enhance Revenue Generation To improve its fiscal position and enhance revenue generation, the Indian government has employed several strategic measures. These include the implementation of the Goods and Services Tax (GST), the expansion of the tax base, and efforts to improvRead more
Government Strategies to Enhance Revenue Generation
To improve its fiscal position and enhance revenue generation, the Indian government has employed several strategic measures. These include the implementation of the Goods and Services Tax (GST), the expansion of the tax base, and efforts to improve tax compliance. Each of these strategies plays a crucial role in augmenting revenue streams and addressing fiscal deficits.
1. Implementation of Goods and Services Tax (GST)
GST Introduction and Objectives: The GST, implemented on July 1, 2017, was a significant reform aimed at creating a unified tax structure across India. Its primary objectives were to simplify the tax regime, reduce the cascading effect of taxes, and broaden the tax base.
Recent Developments:
Rate Adjustments: The GST Council has periodically revised tax rates and introduced measures to streamline the process, such as the recent reduction in GST rates for essential goods.
Technology Integration: The government has upgraded the GST Network (GSTN) to improve efficiency, with enhancements in filing procedures and compliance mechanisms.
Effectiveness:
Revenue Growth: Post-GST implementation, there was an initial increase in tax collections. For instance, GST revenue collections in FY 2023-24 showed a robust growth trend, surpassing ₹1.5 lakh crore per month on average.
Challenges: Despite improvements, challenges remain such as compliance issues among small businesses and disputes regarding the distribution of GST revenue between states and the central government.
2. Expansion of the Tax Base
Initiatives for Broader Tax Base:
Income Tax Reforms: Measures like the introduction of faceless assessments and e-filing systems have been designed to facilitate a broader tax base and improve transparency.
Direct Benefit Transfer (DBT): The DBT scheme has helped in better targeting of subsidies, reducing leakages, and encouraging individuals to enter the formal economy.
Recent Examples:
Digital Economy: With the growth of the digital economy, the government has increased scrutiny and regulation of online transactions to capture a larger share of revenue.
Corporate Tax Reforms: Reductions in corporate tax rates and incentives for new manufacturing companies aim to stimulate investment and, subsequently, tax revenue.
Effectiveness:
Increased Tax Payers: There has been a noticeable rise in the number of individual income taxpayers and corporate tax filers. For example, the number of individual taxpayers increased significantly after the implementation of new compliance measures.
Ongoing Challenges: The informal sector remains a challenge, as it is difficult to track and integrate into the formal tax structure.
3. Drive to Improve Tax Compliance
Government Measures:
Enhanced Enforcement: The Income Tax Department has intensified its efforts to combat tax evasion through measures such as data analytics and increased scrutiny of high-value transactions.
Public Awareness Campaigns: Initiatives aimed at educating taxpayers about their responsibilities and the benefits of tax compliance have been rolled out.
Recent Examples:
Operation Clean Money: This initiative targets large cash deposits and high-value transactions that may be indicative of tax evasion.
Faceless Tax Assessment: Implemented to reduce human intervention and bias, improving the efficiency and fairness of tax assessments.
Effectiveness:
Improved Compliance Rates: The number of tax returns filed and the level of voluntary compliance have increased. For instance, there was a marked increase in the number of returns filed post-implementation of the faceless assessment scheme.
Continuing Issues: Despite improvements, there are persistent challenges such as enforcement in rural areas and among smaller businesses.
Assessment of Effectiveness
Overall, these strategies have had a positive impact on improving the government’s fiscal position. The GST has streamlined tax collection and increased revenue, the expansion of the tax base has incorporated more individuals and businesses into the formal economy, and improved tax compliance measures have enhanced revenue collection efficiency.
However, challenges persist, including issues with GST implementation, tax compliance among small businesses, and the informal sector. Continued reform and adaptation will be necessary to address these challenges and sustain the improvements in revenue generation.
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Government Initiatives to Improve Transparency and Accountability in the Budgetary Process The Indian government has implemented several key initiatives to enhance transparency and accountability in the budgetary process. Notable among these are the Fiscal Responsibility and Budget Management (FRBM)Read more
Government Initiatives to Improve Transparency and Accountability in the Budgetary Process
The Indian government has implemented several key initiatives to enhance transparency and accountability in the budgetary process. Notable among these are the Fiscal Responsibility and Budget Management (FRBM) Act, the publication of Union Budget documents, and the Direct Benefit Transfer (DBT) system. Analyzing these initiatives provides insight into their role in improving the credibility and effectiveness of public financial management.
1. Fiscal Responsibility and Budget Management (FRBM) Act
2. Publication of Union Budget Documents
3. Direct Benefit Transfer (DBT) System
4. Overall Contribution to Public Financial Management
Conclusion
Government initiatives such as the FRBM Act, the publication of Union Budget documents, and the implementation of the DBT system have substantially improved transparency and accountability in the budgetary process. These efforts contribute to the credibility and effectiveness of public financial management by ensuring fiscal discipline, providing accessible information, and enhancing the efficiency of subsidy distribution. Continued focus on refining these initiatives and addressing implementation challenges will be crucial for sustaining and further improving public financial management.
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