Festive season fires up GST revenues to ₹1.3 lakh crore in October

The country’s gross GST (Goods and Services Tax) revenues crossed the ₹1.3 lakh crore mark in October, the second highest collection since the tax regime was implemented in July 2017.

The Union Finance Ministry said this reflected the recovery of economic activity and would have ‘still been higher if the sales of cars and other products had not been affected on account of disruption in supply of semi-conductors’.

October’s GST kitty was 24% higher than the same month a year ago and 36% over the pre-pandemic levels of 2019. This was driven largely by a 39% year-on-year surge in collections from import of goods, while domestic transactions and import of services were 19% higher than October 2020.

ICRA chief economist Aditi Nayar attributed October’s healthy growth in revenues to ‘pre-festive season stocking and improved compliance’. Semiconductor supply challenges could continue to constrain GST compensation cess collections, she pointed out.

The highest-ever GST collections of ₹1.4 lakh crore was recorded in April this year, which the Ministry stressed were related to ‘year-end revenues’, seeking to distinguish last month’s inflows as a more robust sign of recovery. It cited several data points, including an uptick in e-way bills and the amount of taxable value as ‘clearly indicating the recovery in economic activity’.

Compliance levels up

An increase in compliance levels in recent months have also bolstered the GST kitty, the Ministry onserved, again demonstrating the same with charts showing an improvement in timely filing of GST returns by tax-payers.

“In addition to action against individual tax evaders, this has been a result of the multi-pronged approach followed by the GST Council,” the Ministry noted in a statement.

This included measures to ease compliance, combined with steps to ‘discourage non-compliant behaviour like blocking of e-way bills for non-filing of returns, system-based suspension of registration of taxpayers who have failed to file six returns in a row and blocking of credit for return defaulters’.

The gross GST revenue of ₹1,30,127 crore comprises ₹23,861 crore as Central GST, State GST of ₹30,421 crore and Integrated GST of ₹67,361 crore (including ₹32,998 crore collected on import of goods). The GST Compensation Cess collected in the month stood at ₹8,484 crore, including ₹699 crore received on import of goods.

Ms. Nayar stated, “With the October 2021 GST e-way bills expected to exceed the level seen in the previous month, the headline GST collections are slated to remain healthy in a range of ₹1.25-1.35 lakh crore in November”.

According to Deloitte India senior director M.S. Mani if the GST collections continue to be robust in the coming months, there is a chance the government may have higher than expected collections this year. “This would provide some fiscal space to absorb the increased healthcare costs,” he said.

States’ revenue growth

Among the more industrial States, Gujarat and Maharashtra recorded a revenue growth of 25% and 23%, respectively. Karnataka saw an 18% growth, while Tamil Nadu and Haryana, with a large auto industry presence, reported a more subdued growth of 11% and 3%, respectively. The populous States of Uttar Pradesh and Bihar saw a healthy surge of 24% and 34%, respectively, while Odisha reported a sharp 49% uptick in revenues.

Arunachal Pradesh and Uttarakhand were the only ones to record a fall in GST revenues during the month, of 52% and 1%, respectively, while revenues were unchanged for Himachal Pradesh from a year ago. Among the Union Territories, negative growth was reported from Puducherry (-6%), Dadra and Nagar Haveli (-5%) as well as Daman and Diu, which saw a sharp 99% dip in revenues.

“With the ongoing festive season, we can expect similar or even higher GST collections in the coming months,” remarked Abhishek Jain, tax partner at EY India.