From 40% of base; monthly inflow seen at Rs 1.62 lakh cr, versus revenue-neutral Rs 1.42 lakh cr
Going by the initial trend of tax collections under the goods and services tax (GST), the government seems to have little to worry about on the revenue front. The new regime could be revenue-neutral, if not revenue-enhancing. Even as 40% of the 87 lakh taxpayers registered on the GST Network (GSTN) filed their returns and paid taxes, about Rs 65,000 crore was collected, PTI reported early on Monday. Extrapolating this figure for all 87 lakh GSTN registrants, the collections would reach Rs 1,62,500 crore. And these pertain to July, the first month after the GST roll-out, which followed May and June, two months that saw heavy discounting by vast sections of businesses to de-stock.
FE has computed that the revenue-neutral monthly collections from GST at Rs 1.42 lakh crore. The Centre’s indirect tax collection target for the current financial year is Rs 9.26 lakh crore, which includes Rs 72,150 crore to be generated from the basic customs duty that is not subsumed in GST. So, for GST to be revenue-neutral for it, the Centre needs to collect Rs 8.54 lakh crore from GST/taxes that collapsed into GST in 2017-18, or about Rs 71,200 crore a month. A sum roughly equal to this will need to be collected by all states for their overall revenue-neutrality, given that the GST base is divided equally between the Centre and states. The GST Council had earlier defined revenue-neutrality on the basis of a 2015-16 Centre-state (50:50) revenue base of Rs 8.8 lakh crore and 14% annual growth over it.
So the total revenue-neutral monthly GST collection should be Rs 1,42,400 crore (71,200 X 2), and the figure current trend indicates for July (Rs 1,62,500 crore) is significantly higher. Sources said the GST collection data being informally released by government officials now largely includes the input tax credits (ITCs) claimed by the taxpayers, as the use of credit is a continuous process. So these are broadly the net figures and might not undergo major downward revisions due to ITCs. Typically, ITCs will be 30-40% of the gross output tax liabilities, although these vary widely across industries/businesses. Of course, the estimated monthly GST revenue includes the proceeds from the cesses on demerit goods that are meant to compensate states for any revenue loss in the GST regime. Assuming the cess proceeds to be Rs 12,000 crore a month (these have been about Rs 5,000 crore from 40% of base), GST collections are still more than revenue-neutral.
Although the last date for filing the returns for businesses that don’t intend to claim transitional ITC was last Friday, officials said that the rest of the 87 lakh GSTN registrants were likely to continue to pay the tax (with applicable interest) over the next few days. For those businesses that want to claim transitional ITC (and these would include many large industries like automobiles and consumer goods), the deadline for filing of returns and tax payment ended on Monday evening only. “At the start of the day today (Monday), over 36.32 lakh returns had been filed. Final tax collection numbers would be known once all the returns are in,” PTI quoted an unnamed official, as saying. “Under GST, businesses are supposed to file monthly sales returns and pay due taxes online. Since this was the maiden return after GST was rolled out on July 1, the government gave companies extra time to file returns and pay taxes.
GST Network, the company managing the tax filing apparatus, had uploaded form TRAN-1 last week on its portal for businesses to claim credit on taxes paid prior to GST roll-out on July 1. Another official said businesses can continue to file returns and pay taxes even after the deadline ends, much like what happens in case of income tax returns and payment,” PTI reported an official as saying. The main central taxes that collapsed into GST are excise duty, service tax, CVD and SAD, while the state VAT has also been subsumed in it along with sundry other local levies like entry tax. Of Rs 87 lakh registered on the GSTN portal, nearly 71 lakh businesses have migrated from the previous regime, while others have been new taxpayers.