GST strong at ₹1.4L-cr; PMI, auto sales steady | Latest News India

Goods and Services Tax (GST) collection in the month of May (for transactions in April) stayed above the ₹1.4 lakh crore mark for the third consecutive month in what the Union ministry of finance described as an “encouraging sign” and what experts saw as a reflection of the Indian economy’s stability and consistency amid global headwinds. At ₹140,885 crore, the May GST collection was 44% higher than the May 2021 figure although it was significantly lower than the all-time high of ₹1.67 lakh crore recorded in April.Higher inflation and improved tax compliance are supposed to have given a boost to the GST numbers, but what makes the stability in GST numbers even more important is the fact that the five-year period of assured 14% revenue growth to states, which was a crucial to a federal agreement over the roll-out of unified indirect tax regime in the country, is coming to an end in June.Because monthly GST collection numbers capture economic activity with a one-month lag, the latest numbers are indicative of economic activity in April, the first month of fiscal 2022-23 (with the record collection in April, reflecting activity in the last month of the previous fiscal, which could be one reason for the very high number). This also means that caution should be observed in comparing the latest number on both an annual and monthly basis. While the all-time high of ₹1.67 lakh crore reached in April 2022 had an upward bias due to compliance related filings in the last month of the last fiscal, the May 2021 numbers were subdued due to the economic disruption unleashed by the second wave of Covid-19 pandemic which peaked on May 9, 2021.
“The collection in the month of May, which pertains to the returns for April, the first month of the financial year, has always been lesser than that in April, which pertains to the returns for March, the closing of the financial year. However, it is encouraging to see that even in the month of May 2022, the gross GST revenues have crossed the ₹1.40 lakh crore mark,” the finance ministry said in its statement.“Significant efforts in audit and analytics have also led to a drive against tax evaders, inculcating a tax compliance culture,” said MS Mani, partner at Deloitte India. “It is a good indicator of the growth of the economy and ties in with the other macro-economic indicators including the GDP numbers,” Mani added.Out of the total GST revenue collected in May, the central GST (CGST) component is ₹25,036 crore, state GST (SGST) is ₹32,001 crore, and integrated GST (IGST) is ₹73,345 crore, including ₹37,469 crore collected on import of goods and ₹10,502 crore compensation cess, the finance ministry added.“The total revenue of Centre and the States in the month of May 2022 after regular settlement is ₹52,960 crore for CGST and ₹55,124 crore for the SGST. In addition, Centre has also released GST compensation of ₹86,912 crores to states and UTs on 31.05.2022,” it said.As per the law, states will not get any compensation after June 30, even as the cess will continue till March 31, 2026 to clear the borrowings on that account. At the time of introducing the new indirect tax regime in July 2017, the GST law assured states a 14% increase in their annual revenue for five years, and guaranteed that their revenue shortfall would be made good through the compensation cess levied on luxury goods and sin products such as liquor, cigarettes, aerated water, automobiles, coal and tobacco.“The disbursement of compensation up to 31 May effectively brings to end the payout liability of the Centre and the states now can estimate the deficit they will face effective 1 July, when the compensation ends,” said Bipin Sapra, tax partner at consultancy firm EY.Welcoming the Union government’s move, Kerala finance minister T N Balagopal said the state will insist for extension of compensation for five years. “The problem will persist as the compensation is only till June. The state will continue with its demand for extension of the compensation,” he said, adding that it was a big relief for the state, especially in the backdrop of a recent decision on borrowing. Two weeks back, the Centre allowed the state to borrow ₹5,000 crore from the market.To be sure, latest GST data does show a moderation in business activity, as seen in a fall in number of e-way bill filings. “Total number of e-way bills generated in the month of April 2022 was 7.4 crore (74 million) , which is 4% lesser than 7.7 crore (77 million) e-way bills generated in the month of March 2022,” the ministry’s statement said.

ABOUT THE AUTHOR

Roshan Kishore is the Data and Political Economy Editor at Hindustan Times. His weekly column for HT Premium Terms of Trade appears every Friday.
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