The government has settled Rs 21,131 crore to CGST and Rs 15,121 crore to SGST from IGST as regular settlement, it said, in what indicated that the with the transitional credit from the previous regime being exhausted, the CGST revenue has picked up in relation to State GST.
The much-expected stabilisation of the goods and services tax (GST) revenue continues to be elusive. Blame a seeming decline in nominal GDP growth and possibly an increasing inability of the system to check evasion, the gross GST collections plunged to 19-month low of Rs 91,916 crore in September (for primarily August transactions).
The revenue in September 2019 declined by 2.67% from the year-ago month; there was only one precedent ( of August 2018) earlier of the GST collections in any month being lower than in the year-ago month.The collections in August (for July) had come in at Rs 98,202 crore and that was the lowest in the first five months of the current fiscal.
The Centre’s budgeted GST revenue (including CGST, unsettled IGST and compensation proceeds) is projected to grow at close to 14% to Rs 6.63 lakh crore over the last year’s actual level, which was a quarter less than the original projection (BE). Given the rather realistic target set for FY20 in the light of the previous year’s experience of the collections being woefully short of the estimate, the gross GST collections in the first half of the current fiscal have been on target and slightly more than half of the estimate for the full year.
In other words, despite the declining collections over the three months to September, the average monthly collections in H1 stood at Rs 1,01,049 crore, higher than Rs 99,111 crore required to meet the Centre’s target and ensure 14% revenue growth for the states.
For sure, the GST revenue buoyancy so far in the current year has been close to 1.2 (given the 12% nominal GDP growth assumed in the Budget). This was roughly at the same level as the buoyancy witnessed in the first year of GST, as estimated by Kapil Patidar and Arvind Subramanian. So the buoyancy being more than 1, revenue growth is accelerating but it hasn’t improved from the level in the first year.
According to statement issued by the government, the total revenue earned by central government and the state governments after regular settlement in the month of September 2019 stood at Rs 37,761 crore and Rs 37,719 crore respectively. The government has settled Rs 21,131 crore to CGST and Rs 15,121 crore to SGST from IGST as regular settlement, it said, in what indicated that the with the transitional credit from the previous regime being exhausted, the CGST revenue has picked up in relation to State GST.
“The lower collections seem to be on account of the lower GDP growth numbers that we have seen as GST is a transaction tax that is immediately impacted by any decline in any economic activity. However the subsequent festival season is expected to improve collections,” MS Mani, partner at Deloitte India said.
The drop in GST collections reflect the slowing of economic activities. The government on Monday said the aggregate growth of eight core sectors shrank 0.5% in August. In what indicated that October GST revenue might not be any better than that for September, headline seasonally adjusted IHS Markit India Manufacturing Purchase Managers Index stood at the lowest level since May 2014 of 51.4 in the month. The index was at the same level in August.
“The lower collection perhaps do reflect the economic reality on the ground and the government will need to find ways to spur the demand. Further, there is negative growth on import IGST. From the government’s perspective, it may also mean that focus on non tax revenues will need to be more. Also, with virtually no room for increase in GST rates, further strengthening of administrative measures may be needed to improve the level of compliance. Given the collections, further GST rate cuts till end of the financial year now seems unlikely,” Pratik Jain, partner & leader, indirect tax at PwC India, said.