December GST kitty crosses Rs 1 lakh crore, second month in a row
The collection would have been even better but for a 10% decline in the revenue earned through integrated GST (IGST) on imports.
Gross Goods and Services Tax (GST) collections crossed the Rs 1 lakh crore benchmark for the second consecutive month in December 2019. At Rs 1.03 lakh crore, the number marked a 9% year-on-year growth on the back of increased consumption and better compliance. More importantly, the number is in keeping with what government officials have been saying in private — that the worst may be behind the economy.
The collection would have been even better but for a 10% decline in the revenue earned through integrated GST (IGST) on imports. The revenue collection from domestic transactions has grown 16% compared to the same period last year, two people with direct knowledge of the matter said on condition of anonymity.
GST collections have recovered after falling below the Rs 1 lakh crore mark for three months in a row — August, September and October 2019. The September collection was Rs 91,916 crore, the lowest since February 2018. The recovery in GST, which is a tax on consumption, is a positive signal and indicates that it may be possible to achieve the target of collecting about Rs 3.5 lakh crore in the remaining months of current financial year, the two people said.
“A national conference of all stakeholders, including the income-tax department and other administrative agencies, field formation of revenue officials at the Centre and states is scheduled to take place on January 7 to chalk out strategies and further improve compliance, without resorting to overreach, to achieve the target,” one of the two people said.
Out of the gross GST revenue of Rs 1.03 lakh crore in December, the Central GST component is Rs 19,962 crore, state GST is Rs 26,792 crore, IGST is Rs 48,099 crore and cess is Rs 8,331 crore, the finance ministry said in a statement.
“During this month, the IGST on import of goods has seen a negative growth of (-) 10%, but (this) is an improvement over (-) 13% last month and (-) 20% in the month of October,” it added.
The two people cited above said there is a certainty in improvement of revenue collection in the future with the introduction of e-invoicing. The government is also using data analytics and artificial intelligence (AI) to identify violations, they added. “Detection of non-compliance and frauds are targeted through AI and data analytics. They find about 30,000-40,000 suspicious data points every month. We nudge taxpayers to pay the dues. While minor defaulters get messages to pay the due through SMS, those who default to the tune of Rs 5 lakh and above get notices from field officials,” the first official said.
Pratik Jain, partner and leader, indirect tax, PwC India, said: “It’s important to note that this has been achieved without increasing the rates, by simplifying the compliances and plugging tax leakages gradually. The number of GST 3B returns have increased from 7.2 million to 8.1 million from April to December 19, which is encouraging. Also most industrial states seem to have moved up considerably from December 18 collections level, including Maharashtra, Tamil Nadu and Gujarat.”
The first person said the concerns of states would be addressed to a great extent with the increase in GST collection, in two ways — first, by ensuring growth came close to what was guaranteed to the states, and second, through higher compensation cess. The compensation cess collection in December jumped by about ~1,000 crore compared to the previous month.
Due to inadequate compensation cess funds, the Centre was unable to compensate states on time for their revenue shortfalls for four months — August, September, October and November. Just two days ahead of the 38th GST Council meeting, the Centre on December 16 released ~35,298 crore to compensate states for revenue losses for August and September. It is yet to pay compensation for October and November, which was due in the second week of December.
The GST law assures states a 14% growth in their revenue for five years. The Centre is committed to meet any shortfall in the revenue. The compensation is met through a cess fund, which is levied on luxury goods and products such as cigarettes.
Abhishek Jain, tax partner, EY, said the GST collections crossing ~1 lakh crore for the second month in a row and a 16% growth on domestic transactions vis-a-vis December 2018 are both positive developments. “It seems that efforts of the government, like restriction on availment of unmatched credits, to plug GST evasion, is bearing results.”
Pratik Jain said collections appear to have stabilised and the government would need to find ways to increase it to the next level. “Government should now make a long-term plan on GST rates and resist the move to increase the rates selectively. Also, there should be discussions on including real estate and petroleum within the ambit of GST and legislative changes which will simplify the laws further.”