GST collection drops to 19-month low in Sept

Mop-up stood at ~91,916 cr, lower than ~98,202 cr in August

Goods and services tax (GST) collection fell to a 19-month low of ~91,916 crore in September, pointing to a deepening economic slowdown.

The GST mop-up in September was 2.67 per cent lower than the collection in the corresponding month last year at ~94,442 crore and 6.4 per cent below the last month’s figure of ~98,202 crore, the finance ministry data showed on Tuesday.

It’s the second straight month when the collection has fallen below the ~1-trillion mark. This is expected to compound the government’s revenue woes, amid a steep target for 2019-20. The government’s monthly GST collection target is around ~1.18 trillion.

In the first six months till September, the GST collection grew by 4.9 per cent compared to the year-ago period.

The central GST collection in September was lower at ~16,630 crore compared to ~17,733 crore in August. The state GST collection was ~22,598 crore, compared to ~24,239 crore the previous month. The integrated GST mop-up was also lower at ~45,069 crore against ~50,612 crore in August.

“The lower collection reflects the economic reality on the ground and the government will need to find ways to spur demand. With virtually no room for an increase in GST rates, further strengthening of administrative measures may be needed to improve the level of compliances,” said Pratik Jain, partner, PWC India.

Subdued revenue collections pose a challenge for Finance Minister Nirmala Sitharaman. The steep growth target of 16 per cent for the central GST in FY20 reinforces the need for emphasis on data intelligence and policies to plug leakages. The CGST collection target was, in fact, revised downwards to ~5.26 trillion for the fiscal year from ~6.1 trillion estimated in the interim Budget, following a 9 per cent shortfall in the actual collection for the previous year.

Lower-than-expected revenues are also putting pressure on the Centre to compensate states for the revenue shortfall. The compensation cess collection stood at ~7,620 crore during the month, which appears much smaller than the approximately ~13,000 crore compensation going out to states on a monthly basis. There was a shortfall of around ~24,000 crore between the GST compensation cess collected till August and the compensation disbursed to states to meet the revenue shortfall.

“The lower collections seem to be on account of the lower GDP growth numbers that we have seen, as GST is a transaction tax that is immediately impacted by any decline in any economic activity. However, the coming festival season is expected to improve collections,” said M S Mani, partner, Deloitte India.

India’s GDP growth fell to a six-year low of 5 per cent in the April-june period.

“The intention of the government is to bring back the economy to a high growth trajectory and this can be achieved not by rate cuts but by pragmatic rate rationalisation and improved compliances,” said Abhishek Rastogi, partner at Khaitan & Co.

The government is working on measures to plug tax evasion, including data analysis, new return formats, e-way bill, einvoicing, and mandatory e-ticketing for movie theatres.

A total of 75.9 lakh GSTR-3B, or summary returns, were filed in September, a shade higher than 75.8 lakh in the previous month.