Robust Rise: July GST mop-up sees smart recovery

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August 02, 2021 3:00 AM

Gross GST collections, after remaining above the Rs 1-lakh-crore mark for eight months in a row, came in at Rs 92,849 crore in June (May transactions), reflecting the blow to the economy from a virtually pan-India lock-down.

gst“The serious issue that Kerala's finances were confronted with was a squeeze in tax collection. Unfortunately, GST has not helped reverse the situation,” the minister said.

Gross goods and services tax (GST) collections came in at an impressive Rs 1.16 lakh crore in July (largely June transactions), up a third on year and a quarter on month, reflecting a smart economic recovery after the second Covid-19 wave. That in the first 25 days of July, the average daily e-way bill generation was 8.8% higher than the level in June and 54% higher than in May indicates the August collections (from July sales) could be even higher.

Thanks to steps taken to improve compliance and a shift of business away from the informal sector, GST seems starting to yield the revenue productivity its proponents ascribed to it. Even as the weighted average GST rate continues to be around 11% against the revenue neutral rate computed of 15% or thereabouts and major items like auto fuels are still outside GST net, the collections have shown an upswing for several months till the pandemic’s second wave hit businesses.

Gross GST collections, after remaining above the Rs 1-lakh-crore mark for eight months in a row, came in at Rs 92,849 crore in June (May transactions), reflecting the blow to the economy from a virtually pan-India lock-down.

Of the gross GST revenue collected in the month of July 2021, Central GST was Rs 22,197 crore, State GST Rs 28,541 crore, Integrated GST Rs 57,864 crore (including Rs 27,900 crore collected on import of goods) and cess Rs 7,790 crore (including Rs 815 crore collected on import of goods).

During July, revenues from import of goods were 36% higher and the collection from domestic transactions (including import of services) were 32% higher than the revenues from these sources during the year-ago period. “GST collection, after posting above Rs 1-lakh-crore mark for eight months in a row, dropped below Rs 1 lakh crore in June 2021 as the collections during June 2021 predominantly related to May 2021…,” the finance ministry said.

“With the easing out of Covid restrictions, GST collection for July 2021 has again crossed Rs 1 lakh crore, which clearly indicates that the economy is recovering at a fast pace. The robust GST revenues are likely to continue in the coming months too,” the ministry said.

For the second year in a row, the Centre will borrow under a special, relatively low-cost mechanism in 2021-22 to bridge a yawning shortfall in the GST compensation cess pool and transfer the funds to states as back-to-back loans, sans any big fiscal cost to states. The plan is to borrow under this window in Rs 1.58 lakh crore in 2021-22.

While the amount borrowed under the RBI-enabled mechanism last year was Rs 1.1 lakh crore, the Centre recently acknowledged in Parliament that an amount of Rs 81,179 crore was yet to be released to the state governments towards fully compensating them for their GST revenue shortfall for the financial year 2020-21.

(with PTI inputs)

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