GST collection in October exceeds ₹1L cr mark first time in eight months

HT reported on October 24 that the GST collections, a barometer of economic health, would surpass ₹1 lakh crore

The Goods and Services Tax (GST) collection in October exceeded the ₹1 lakh crore benchmark for the first time in eight months at ₹1,05,155 crore, over 10% annualised jump and a second consecutive growth, indicating strong signs of economic recovery since the Covid-19 pandemic gripped India and forced a national lockdown in March this year.

The tax collection saw positive growth for the first time in September with a modest 4% year-on-year increase at ₹95,480 crore after remaining subdued for seven months.(PTI)

“During the month, revenues from import of goods was 9% higher and the revenues from domestic transaction are 11% higher than the revenues from these sources during the same month last year,” a finance ministry statement said on Sunday.

HT reported on October 24 that the GST collections, a barometer of economic health, would surpass ₹1 lakh crore. The tax collection saw positive growth for the first time in September with a modest 4% year-on-year increase at ₹95,480 crore after remaining subdued for seven months.

Improved collection will proportionately reduce the amount required for compensating states, a finance ministry official, said requesting anonymity. The Union government is borrowing Rs.1.1 lakh crore on behalf of states to compensate them for a part of the estimated Rs. 2.35 lakh shortfall this fiscal year in their share of revenue from GST because of a steep fall in collection.

With the “Unlock” process gathering pace, economic activities have begun to revive, said MS Mani, a partner at consulting firm Deloitte India. “Collections which are higher by nearly ₹10,000 crores compared to the same period in 2019 indicate the definitive revival of consumption and festival spends across the economy. Continuance of this trend will help in narrowing the fiscal deficit for FY 21 (financial year 2021) and will go a long way in reviving business confidence across sectors as the impact of the unlockdown process across states gets translated into GST collection figures,” he said.

The coronavirus disease outbreak forced a 68-day hard lockdown starting March 25, which saw temporary closure of manufacturers and service providers in all sectors but those deemed essential, confined citizens indoors and shut public transport. Lockdown restrictions have gradually been eased.

As a result of the lockdown, the GST revenues declined by a year-on-year 8.4% to ₹97,597 crore in March, and by 72% to ₹32,172 crore in April. In May, revenue from the indirect tax dropped 38% on an annual basis to ₹62,151 crore. The pace of the decline slowed to 9% in June, when ₹90,917 crore revenue came in, thanks to receipts from the lockdown backlog. Revenue again contracted sharply year-on-year by 14.3% in July to ₹87,422 crore and 13% in August to ₹86,449 crore. The collections saw first positive growth after seven months in September 2020 with a modest 4% year-on-year increase at ₹95,480 crore.

Mani said the comparison of the GST collections in case of major states with the similar period last year shows very clear signs of increase in consumption and festive buying. “If the trend of the past two months continues, then it would indicate that a sustained economic revival is underway” he added.

According to the official data issued on Sunday, GST revenue collection in Maharashtra grew by 5% at ₹15,799 crore over the same period last year. The growth trend was stronger in Gujarat at 15% ( ₹6,787 crore) and 19% in Haryana at ₹5,433 crore. Revenue collection of Delhi, however, saw an 8% fall at ₹3,211 crore.

According to the official statement, the total number of returns filed for the month of October was 8 million.

Pratik Jain, partner and leader of the indirect tax practice at PwC India, said, “Given the surge in number of returns filed and the fact that there is clear uptake in demand due to revival of economy as well as upcoming festive season, it’s not surprising that collections in October has exceeded 1 lac crore.”

“One of the reason for higher number of returns could be the fact that last date for claiming input credit for 2019-20 was September 30th and lot of companies would have carried out a yearly reconciliation and asked their vendors to file returns or report missing transactions. Given the festivities, collections in November could also be robust. We would need to see if this trend continues after November as well,” he added.

Abhishek Jain, tax partner at consultancy firm EY said that some potential reasons for this surge could be the “splurged demand” on account of the festivities and other reconciliations.