The goods and services tax (GST) collections came in at Rs 1.49 trillion in July (June transactions), up 28% on year, thanks to resurgent economic activities, improved compliance, high inflation and a broadening of the tax base. The collections crossed the Rs 1.4-trillion mark for the fifth straight month. The July mop-up was also the second-highest in any month.
The monthly average mop-up in the April-July period was an impressive Rs 1.5 trillion, up 35% on year. If this pace is sustained through March 2023, gross GST receipts in the current financial year, including compensation cess proceeds, may exceed the estimate by a neat Rs 3 trillion, allowing the Centre to appropriate an additional Rs 80,000 crore after devolution to the states.
The gross GST collections by the Centre and states, going by the Union Budget, are estimated at Rs 14.76 trillion – Rs 6.6 trillion as central GST, Rs 6.96 trillion as state GST, and cess of Rs 1.2 trillion. Against this, the gross receipts could be upwards of Rs 18 trillion going by the current trend. Officials reckon that collections could further rise in the coming festival months, and this would be seen August onwards when traders begin to stock up.
“The growth in GST revenue till July 2022 over the same period last year is 35% and displays a very high buoyancy. This is a clear impact of various measures taken by the GST Council in the past to ensure better compliance,” the finance ministry said in a statement. Higher inflation coupled with economic recovery has been having a positive impact on the GST revenues consistently in the past several months.
The gross GST revenue collected in July 2022 consisted of central GST of Rs 25,751 crore, state GST of Rs 32,807 crore, integrated GST of Rs 79,518 crore (including Rs 41,420 crore collected on import of goods) and cess receipts of Rs 10,920 crore (including Rs 995 crore collected on import of goods).
During the month, revenues from import of goods were 48% higher and those from the domestic transaction (including import of services) were 22% higher than the year-ago levels.
The government has settled Rs 32,365 crore to CGST and Rs 26,774 crore to SGST from IGST. The total revenue of the Centre and the states in July 2022 after the regular settlement is Rs 58,116 crore for CGST and Rs 59,581 crore for the SGST.
The five-year guaranteed GST shortfall compensation mechanism came to an end on June 30, but the buoyancy in GST receipts could help narrow the gap in receipts vis-à-vis the protected level of 14% CAGR growth for states. “It’s important to note that now states would no more be compensated by the Centre for a shortfall in the revenues and hence we have already started seeing the SGST departments of states getting aggressive in terms of collections,” Vivek Jalan, partner at Tax Connect Advisory, said.