Robust GST revenue in August of over 1.4 lakh crore for the sixth month in a row shows that inflation has had a limited impact on the Indian economy, and that the buoyant collection will help the nation absorb external shocks such as high crude prices, said experts. Further, GST collection will likely see significant upside in the rest of the year as compared to the budget estimates, partly due to the upcoming festive season boost. Monthly GST collection in August surged 28 per cent on-year to Rs 1.43 lakh crore on the back of economic recovery. “Better reporting coupled with economic recovery has been having a positive impact on the GST revenues on a consistent basis,” the Ministry of Finance said in a statement.

Robust GST collections indicates limited impact of inflation on economy

Saurabh Agarwal, Tax Partner, EY said that while the GST revenue collections remain above 1.4 lakh crore for 6 consecutive months, decline in cess collections by approximately 7% compared to last month indicate decreased demand of goods such as automobile, cigarettes and aerated beverages. “Effectively, the robust GST collections can be said to be showing limited impact of inflation on India’s economy compared to the rest of the world,” he added.

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Buoyant GST collection to help alleviate external shock

August’s sharp 28% rise in the GST collection has positioned the GST revenue above Rs 1.4 lakh crore for six months in a row. What’s interesting is that GST on both domestic goods and imports saw a surge this month. “This comes after essential food items like atta, paneer, curd, rice, oats, organic food, pulses, and bread were put under the 5% GST slab. The buoyant collection will help in alleviating the external shock, especially in terms of high crude prices which have had a negative impact on the fiscal math,” Shravan Shetty, Managing Director, Primus Partners.

Considerable upside likely in CGST collections

“While the absolute GST collections displayed a mild sequential dip in August 2022, the YoY growth rate remained at an impressive 28% reflecting the revival in consumption, improved compliance as well as elevated inflation. Looking ahead, the YoY growth in GST collections is likely to remain well above 20% in September 2022, before tempering down to 12-15% in Q3 FY2023, on a normalising base, trending close to the nominal GDP expansion. We continue to foresee a considerable upside in the CGST collections relative to the FY2023 BE, more than offsetting the expected loss in excise collections, said Aditi Nayar, Chief Economist, ICRA.

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Upcoming festive season to boost GST collections

“These collections certainly reflect the strength of the underlying economic factors as they have established a new normal of Rs 1.4 lakh crore. With the onset of the festival season, which is typically a large consumption driver for all businesses, the GST collections in the coming months would also be expected to be robust,” MS Mani, Partner, Deloitte India.