Though the fall in GST collections in November is disappointing, it is important to put the numbers in perspective. From Rs 95,000 crore in July (the original number was `92,283 crore but that got revised with people filing late returns), the number fell to Rs 83,346 crore in October and further to Rs 80,808 crore in November. Part of this was to be expected due to the sharp cut in GST rates in November and exporters were also exempted from GST—earlier, they had to pay the tax and seek refunds later. Also, since the festival season was in October, November collections were expected to be lower. What is less easy to explain, however, is the fall in the number of people filing returns, down from 5.87 million in July to 5.3 in November—of course, this is higher than October’s 5.01; at 63-64% of the eligible base, the compliance is undoubtedly poor. The taxman is already looking for explanations and, hopefully, these will be made public soon.
There are, however, various reasons to believe the worst is over. For one, with a transitional credit of around Rs 65,000 crore set to be exhausted this month, while December’s collections could fall to even lower than November’s, things will look up from January onwards. How much December collections fall also depend upon the taxes filed by 16 lakh or so units who, under the composition scheme, are to file their returns on a quarterly basis and will do so this month.
What is important now is to continue to find ways to simplify the system. To address the issue of too many returns, it appears, the GST Council may go in for one composite monthly return. The issue of uploading invoice-level details remains, but it is possible that with the system stabilising and firms getting more familiar with GST and developers coming out with more apps/tools to make filing easier, it may work better this time around—the GST Council is clear that it does not want to sacrifice invoice-matching since this lies at the heart of GST. The taxman has also started some random audits to spur compliance—to the extent the audits are focused on the larger players who generate a large part of the collections, this will spur compliance; the flipside of this, and that is not a minor concern, is that it could give a fillip to the inspector raj. The e-way bill, which has its own set of problems in terms of increasing inspector-raj, is to be introduced soon and that too is seen as a measure to boost compliance. As GST rates come down, this will also simplify the system and make filing easier. The GST Council has reason to be worried about tax collections but it is too early to start panicking since, in overall terms, the April to November collections are pretty much on target.