Telangana among top five exporting states

The youngest State of the country, Telangana tops in driving the export economy of the country along with Tamil Nadu, Maharashtra, Karnataka and Gujarat. The Economic Survey – 2018 states that these five States account for 70 per cent of exports.

In the first three years itself India's youngest state scored an impressive 49 per cent growth in IT exports. The flagship IT sector had notched up an impressive 49% exports growth at Rs 85,470 crore from Rs 57,258 crore in 2013-14. However, job creation by this sunshine sector, which has been seeing layoffs as well as increased automation, has failed to keep pace with exports growth.

A preliminary analysis of the Goods and Services Tax (GST) data reveals that there has been a 50% increase in the number of indirect taxpayers, besides a large increase in voluntary registrations, especially by small enterprises that buy from large enterprises and want to avail themselves of Input Tax Credit (ITC).

The Economic Survey 2017-18 presented today in Parliament by the Union Minister of Finance and Corporate Affairs, Arun Jaitley informs that as on December 2017, there were 9.8 million unique GST registrants slightly more than the total Indirect Tax registrants under the old system (where many taxpayers were registered under several taxes).

Therefore, adjusting the base for double and triple counting, the GST has increased the number of unique indirect taxpayers by more than 50 percent –a substantial 3.4 million.
The profile of new filers is interesting of their total turnover, business-to-consumer (B2C) transactions account for only 17 percent of the total. The bulk of transactions are business-to-business (B2B) and exports, which account for 30-34 per cent apiece.

There are about 1.7 million registrants who were below the threshold limit (and hence not obliged to register) who nevertheless chose to do so. Indeed, out of the total estimated 71 million non-agriculture enterprises, it is estimated that around 13 percent are registered under the GST.

Maharashtra, UP, Tamil Nadu and Gujarat are the States with the greatest number of GST registrants. UP and West Bengal have been large increases in the number of tax registrants compared to the old tax regime.

New data on the international exports of States suggests a strong correlation between export performance and States‘ standard of living. Last year Survey had estimated that India‘s Inter-State trade in goods was between 30 and 50 per cent of GDP. But the GST data suggests that India‘s internal trade in goods and services (excludes non-GST goods and services) is actually even higher and is about 60 percent of GDP.

The survey based on new GST data also provides a close look at the firm-level exports and states that India‘s exports are unusual in that the largest firms account for a much smaller share of exports than in other comparable countries. Export concentration by firms is much lower in India than in the US, Germany, Brazil, or Mexico. The top one per cent of firms accounted for 72, 68, 67 and 55 percent of exports in Brazil, Germany, Mexico, and USA respectively but only 38 per cent in the case of India.

Similarly, the top 5 per cent accounted for 91, 86, 91 and 74 percent in those countries, compared with 59 percent in India and the top 25 per cent of firms accounted for 99, 98, 99 and 93 per cent in those countries, as opposed to 82 per cent in India. Referring to India‘s formal sector, especially formal non-farm payroll, the Survey says it is substantially greater than currently believed.

Formality defined in terms of social security provision yields an estimate of formal sector payroll of about 31 per cent of the non-agricultural work force; formality defined in terms of being part of the GST net suggests a formal sector payroll share of 53 per cent.

The Chapter titled ― A New, Exciting Bird‘s-Eye View of the Indian Economy Through the GST sums up that most of the discussions in the run-up to the GST centered on the size of the tax base, and its implications for the Revenue Neutral Rate (RNR). The RNR Committee had estimated a base of Rs.68.8 lakh crore and the GST Council had estimated a base of Rs.65.8 lakh crore.

Current data suggest that the GST tax base (excluding exports) is Rs.65-70 lakh crore, broadly similar to these two previous estimates. Based on the average collections in the first few months, the implied weighted average collection rate (incidence) is about 15.6 per cent. So, as estimated by the RNR committee, the single tax rate that would preserve revenue neutrality is between 15 to 16 per cent, the report suggests.