Goods and services tax (GST) collections in October — concerning mostly September transactions — came in at Rs 95,380 crore, 5.29% lower than in the year-ago month, amplifying concerns over a likely big deficit in revenue from this comprehensive indirect tax and cementing the notion that economic slowdown is barely being reversed.
The September GST collections were just Rs 91,916 crore, a 19-month low, and these were 2.7% lower than the year-ago month. There was only one more occasion since GST’s April 2017 launch the collection for any month declined from the year-ago month — in August 2018.
The low October GST mop-up was despite the fact that as the month that follows the middle point of the fiscal, October is believed to be a high-revenue month for the government, rivalled only by April, that follows the end of fiscal year. Collections in October 2018 was Rs 1,00,710 crore and there were only six more months when the overall GST revenue crossed the Rs 1 lakh crore threshold.
Worse, the GST on imports dipped 3.38% in October 2019, reflecting the 13.5% contraction in merchandise imports during September, which mirrored a consumption slump ahead of the festive season.
For the Centre, the anaemic GST collections mean its Central GST (CGST) revenue could fall considerably short, impacting the budget maths.
While the monthly average CGST revenue to reach the Budget estimate for FY20 is Rs 43,833 crore, the collections thus far has been Rs 40,829 crore per month. That is a shortfall of a neat Rs 3,000 crore per month or Rs 36,000 crore a year.
The state governments are also feeling the pinch as the requirement of compensation is rising and the compensation ces kitty is shrinking. In the April-October period, the average monthly compensation cess kitty was Rs 8,115 crore, which would mean a shortfall of over Rs 1.1 lakh crore on an anualised basis. Of course, going by the past trend, some Rs 60,000 crore of the unallocated IGST funds might finally get distributed among the states towards the end of year, reducing the shortfall to that extent.
At the end of September, over a Rs 1 lakh crore of IGST remained unallocated. A tax official had told FE earlier that the likely cess receipts this year might be enough to bridge the states’ GST revenue shortfall only till December.
Pratik Jain, partner & leader, indirect tax at PwC India, wrote: “While for April-September, there is still over 3% growth when compared to corresponding period last year, it is declining steadily. For November, the collection should be better given the festivities in October. While with simplification of compliances and tightening of administrative measures, collection could slightly improve in next few months, there is definitely a need of stimulus to spur demand”.
In a sign that the economic slowdown is only getting worse, the output of eight core industries, which include coal, steel, cement and electricity, contracted 5.2% in September, the sharpest decline at least since April 2005. While coal output shrank 20.5% in the month, six other sectors too declined, leaving only fertilisers to register positive growth.
A government release said on Friday: “The gross GST revenue collected in the month of October, 2019 is Rs 95,380 crore of which CGST is Rs 7,582 crore, SGST is Rs 23,674 crore, IGST is Rs 46,517 crore (including Rs 21,446 crore collected on imports) and Cess is Rs 7,607 crore (including Rs 774 crore collected on imports). The total number of GSTR 3B Returns filed for the month of September up to 31st October, 2019 is 73.83 lakh.” It added that the government has settled Rs 20,642 crore to CGST and Rs 13,971 crore to SGST from IGST as regular settlement. “The total revenue earned by Central Government and the State Governments after regular settlement in the month of October, 2019 is Rs 38,224 crore for CGST and Rs 37,645 crore for the SGST”.
