New fiscal year begins on a positive note: GST mop-up at new peak

Collections in March hit an all-time high of at Rs 1.42 trillion; FM says some states may report revenue growth above 14%

Monthly goods and services tax (GST) collections hit an all-time high of Rs1.42 trillion in March (February transactions), indicating robustness in consumption, efficient plugging of tax evasion and a sustained shift of business to the formal sector of the economy.

Continued buoyancy in GST collections for several months in a row would help allay the state governments’ concerns about a revenue shock they might have to deal with once a five-year revenue protection ends on June 30. For the Centre, the high mop-up would mean its share of the tax as Central GST would be higher than the revised estimate of Rs 5.7 trillion for FY22 by Rs 20,000 crore or thereabouts.

Given that an incipient pick-up in consumption has resulted in a more-than-proportionate jump in GST revenues, a stronger economic recovery could allow the collections to settle at an elevated level, proving the high revenue productivity of the broad-based consumption tax.

 

Shortly after the data was released, finance minister Nirmala Sitharaman said at a function here that several states displaying high efficiency in collecting the taxes on transactions in their domain had now become confident of achieving a revenue growth above 14%, the guaranteed level under the compensation mechanism. Underscoring the importance of a stable GST regime, she said, the efforts made by the tax authorities to cut outflows in the form of undeserved refunds and the use of technology, data and artificial intelligence to curb tax evasion, helped accelerate collections.

The minister, however, stressed the need for a rationlisation of GST rates given that the weighted average rate was hovering around 11%, much below the revenue neutral rate of 15-15.5% estimated when the tax was launched with the current base. The timing of the rate rejig, the minister said, would be decided by the GST Council, which should soon receive a report on the same by a group of ministers headed by Karnataka chief minister Basavaraj Bommai. Given elevated inflation, a comprehensive restructuring of GST slabs might have to wait, analysts reckon.

“The (March) revenues are 15% higher than in the same month last year and 46% higher than in March 2020,” the finance minister said in a statement. “Coupled with economic recovery, anti-evasion activities, especially action against fake billers have been contributing to the enhanced GST. The improvement in revenue has also been due to various rate rationalisation measures undertaken by the GST Council to correct inverted duty structure,”the finance ministry said in a statement.

During March, revenues from import of goods was 25% higher and the revenues from domestic transaction (including import of services) are 11% higher than the revenues from these sources during the same month last year.

The average monthly gross GST collection for the last quarter of FY22 has been Rs 1.38 trillion against the average monthly collection of Rs 1.1 trillion, Rs 1.15 trillion and Rs 1.3 trillion in the first, second and third quarters, respectively.

Devendra Kumar Pant, chief economist at India Ratings & Research on said: “There is a concern on inter-state variation in GST collections. While collections grew more than 15% for Punjab, Haryana, Odisha, Maharashtra and Andhra Pradesh in March 2022, for states such as West Bengal. Jharkhand, Chhattisgarh, Madhya Pradesh, Tamil Nadu, Telangana, Rajasthan and Uttar Pradesh growth was less than 10%.”

Source:::FINANCIAL EXPRESS,  dated 02/04/2022.