Sources said GST revenue grew 14% during Novermber18–March19 period, which was after substantial rate cuts had been made.
The declining trend in goods and services tax (GST) revenue this fiscal is largely due to a cyclical consumption slowdown, especially in the auto sector, official sources said while refuting Kerala finance minister Thomas Isaac’s view that it was a reflection of inefficient administration of rates that were slashed below revenue-neutral levels.
Isaac had expressed his views through a tweet on Wednesday, a day after GST collection for September came in. The mop-up at Rs 91,916 crore was the lowest in 19 months and only for the second time since the GST was launched in July 2017, that monthly collection dipped (2.7%) compared with the year-ago period.
Sources said GST revenue grew 14% during Novermber18–March19 period, which was after substantial rate cuts had been made. The GST mop-up started to slow down to a 5% growth level since April 2019, which disproves that rate cuts impacted revenue growth, sources said.
“Low GST collection is not because of slashing of rates but cyclical slowdown in auto & some other sectors are major contributors. Most rate cuts were in 2018 but from Nov 18 to March 19 growth of revenue was 14%. Kerala party to every rate cut,” Sushil Modi, deputy chief minister of Bihar, tweeted on Thursday.
The collection in September was impacted by widespread disruption due to rainfall in major economic centers like Mumbai which further affected consumption. Further, while GST revenue witnessed a less-than-expected growth rate of 5% during May-August 2019, tax on domestic inter- and intra-state supplies has seen a growth of 9%, which has been pulled down by a negative growth rate of 4% in GST on imports.
Reacting to Isaac’s comments on rate cut, sources said all such decisions have been unanimous, except for one instance when Kerala asked for voting on the GST rate for lottery. Kerala tax officials also participated in fitment committee meetings where officials prepare and discuss proposals for rate cuts, sources said.
“Record low GST collection is not only a reflection of economic slowdown, but also the mess in GST administration. What compliance can you expect when even first annual return is yet to be filed? And also rates have been continuously slashed to less than revenue-neutral levels,” Isaac had tweeted on Wednesday.
The GST Council has had to extend the deadline for filing annual returns for the first year of GST (FY18) to November 30. The original deadline was December 31, 2018 but four extensions have been granted.