India’s GST revenue has touch a new high; can it be sustained?

By: Admin
May 25, 2024
Categories: GST Recent News
4 Min Read

It took a little less than seven years since its introduction on July 1, 2017, for the goods and services tax (GST) to cross the Rs. 2 lakh crore-mark in April 2024. At Rs. 2.1 lakh crore, registering a 12.5% growth year-on-year, this was the highest ever monthly collection from the indirect tax levy.

This was more than double the mop up of Rs 92,283 crore from GST in its first month of rollout in July 2017. The mop up from GST crossed Rs1 lakh crore for the first time in April 2018, when it amounted to Rs 1.03 lakh crore. Over the years, the number of taxpayers under the indirect tax levy has nearly trebled to 14.6 million at present from just 5.95 million when it was launched.

Commenting on the April data, Union Finance Minister Nirmala Sitharaman noted that GST has improved tax buoyancy from 0.72 (pre-GST) to 1.22 (2018-23). “Despite compensation ending, state revenues remain buoyant at 1.15,” she said in a post on X (formerly known as Twitter).

She emphasised that even though the GST rate is lower than the prescribed revenue neutral rate and the impact of Covid-19 has affected revenues, the tax collections (as a percentage of GDP) have now rebounded to pre-GST levels in both net and gross terms.

An important point to underscore here is that the dynamism of GST revenues has markedly strengthened, which is evident in the consistent average monthly run rate of Rs 1.5 lakh crore observed in the previous fiscal. This uptrend in GST collections can be attributed to several factors. To begin with, the sustained momentum in economic activities has played a pivotal role, reflecting a buoyant marketplace. Moreover, experts underscore that April’s surge in collection figures is not solely a product of ongoing economic vibrancy but is also influenced by year-end compliances and a concerted effort to enhance overall compliance standards. They also point out that typically April of every year registers a jump in the mop-up from the levy.

A Professor at the think tank National Institute of Public Finance and Policy, is of the opinion that the Rs 2.1 lakh crore revenue collection in April was mainly due to the fact that businesses had filed returns for the year ending 2023-24 as March was the last month of the fiscal.

“Inflation is another factor due to which GST revenues have been high. The tax administration has also been using information to target offenders and increase compliance,” he says, adding that he is not very confident that a Rs 2 lakh crore-plus revenue collection every month from GST is possible. It is likely to have fallen again the very next month.

Prior to this, the collection from GST hit its highest ever mark in April 2023 at Rs 1.87 lakh crore and before that in April 2022 at Rs1.68 lakh crore.

An expert explaining this point out that these collections could be the tipping point in the GST collection trajectory. “While some part of the increased collections are attributable to the financial year-end upswing, it is also reflective of the significant improvements in GST compliance by businesses,” he says, adding that the relentless focus on GST audits by both central and state GST authorities, together with the periodic drives to stamp out evasion, has led to a large increase in the focus on GST compliance spread across businesses throughout the country.

Data on e-way bills, that are issued for transport of goods above Rs 50,000 by GST-registered persons, indicate that the volume of these have eased marginally. In April 2024, 96.6 million e-way bills were issued as against 103.5 million in March. May’s tax collection numbers will be based on the transactions in April, including those through the e-way bills.

The ongoing reforms in GST are expected to persist, potentially resulting in increased tax revenues. Additionally, the Finance Minister recently swore in Sanjaya Kumar Mishra as the inaugural President of the GST Appellate Tribunal, marking a significant milestone. This inauguration is viewed as the initial stride, with long-awaited tribunals anticipated to commence operations in the coming months.

There is also expectation that the GST rate rationalisation exercise will be taken up after the General Elections. “The impact of such a rationalisation on different states will have to be seen as there is no GST compensation available now. A rate rationalisation may not be a cakewalk as states will not want to lose any revenue,” he warns.

For the trade and industry sectors, which have eagerly awaited these reforms, their implementation would signify a significant stride forward. By streamlining the tax structure and expediting the appeals process, these reforms actually promise to catalyse a positive transformation. These reforms could further improve compliance and potentially result in increased tax revenues.

Source from: https://www.businesstoday.in/magazine/the-buzz/story/indias-gst-revenue-has-touch-a-new-high-can-it-be-sustained-430852-2024-05-24