goods and services tax (GST) collections in FY23 on a gross basis could come in at an average of Rs 1.35 trillion a month, as against around Rs 1.2 trillion budgeted, according to official sources. This would mean gross collections in the year would be Rs 1.8 trillion more than estimated.
Given that gross receipts are distributed among the Centre and states almost equally, the Centre’s gross GST receipts, including compensation cess proceeds, could be some Rs 90,000 crore more than the budgeted Rs 7.8 lakh crore. Of course, the compensation cess proceeds go to the states entirely and the Centre also transfers 42% of the Central GST proceeds to states as per the Financial commission formula.
In the current financial year, the Centre will be collecting about Rs 60,000 crore more in GST revenues than the budget estimate (BE).The extra CGST collections will give the much-needed headroom to the Centre in FY23 to absorb revenue losses on account of likely excise duty cut on petrol and diesel to insulate consumers from high auto fuel prices if the Indian basket of crude remains over $100/bbl for a long period.
The overall buoyancy in GST collections in recent months due to a crackdown on evasion and greater formalisation of the economy after the pandemic broke out in 2020, will help the GST Council to undertake a phased rationalization of tax rates and slabs to augment revenues, an official said. The GST Council will likely meet in April to consider the recommendation of the group of ministers on rate rationalisation headed by Karnataka chief minister Basavaraj S Bommai. It is yet to submit the report to the Council.
The proposed rejig of GST slabs are meant to raise the revenue-neutral rate to 15-15.5% from a little over 11% now, and thereby enable the state governments to absorb a revenue shock from the absence of compensation mechanism from July this year.
With the daily e-way bills generation for inter-state trade in goods under the GST regime at Rs 24.47 lakh in the first 27 days of February, the highest since the system was rolled out in September 2018, the gross GST collections for March (February sales) is estimated to be Rs 1.35 lakh crore in March.
The GST monthly collections will average about Rs 1.23 trillion in FY22. The trend so far indicates that the CGST collections could exceed the FY22 revised estimate (RE) by at least Rs 20,000 crore. The Centre’s CGST receipts are estimated (RE) to be Rs 5.7 trillion (Rs 40,000 crore more than BE) and the BEFY23 is Rs 6.6 trillion.
“Healthier GST collections will take away some of the pain of the states due to the end of the compensation period,” said ICRA chief economist Aditi Nayar.
There could be an upside of Rs 50,000-60,000 crore over the BE for CGST in FY23, Nayar said, adding that the extra receipts will help to absorb part of the shortfall on excise duties if taxes are cut on auto fuels.
“If inflation in FY23 is higher than FY22 and GST rates are changed, we may see higher GST collections,” said India Ratings chief economist DK Pant.
Finance minister Nirmala Sitharaman on Monday told Parliament that many states have requested for extension of the compensation period beyond June 2022. However, she said the central government is committed to GST compensation to states for five years as per the Constitutional provision. During the transition period, the states’ revenue was protected at 14%/annum over the base year revenue of FY16.