GST collection in August falls 12% YoY amid Covid
GST collection in Aug may have been dented as many small businesses have not yet filed returns
NEW DELHI: Goods and Services Tax (GST) collection in August fell a little over 1% to ₹86,449 crore from the previous month and 12% year-on-year because of the coronavirus disease pandemic and lockdowns in some parts of the country that took their toll on government revenues, but experts said the broad trend indicates an uptick in the economy.
The August GST collection, which declined from ₹87,422 crore in July, may have been dented because many small businesses have not yet filed their monthly returns, the finance ministry said on Tuesday. “It may also be noted that the taxpayers with turnover less than Rs 5 crore continue to enjoy relaxation in filing of returns till September,” it said in a statement on Tuesday.
GST collection in August was 88% of ₹98,202 crore collected in the corresponding month same year, which would indicate a recovery in business activity compared with the revenue garnered in April and May. Tax collection was worst hit in the first two months of the current financial year because of a 68-day hard lockdown enforced across the country since March 25 to check the spread of Covid-19.
GST collection in April 2020 had plunged 72% at ₹32,172 crore compared to the same month last year. The annual fall in May this year was 38% at ₹62,151 crore. Although the year-on-year fall in June this year came down 9% to ₹90,917 crore mainly because of the payment of past dues, revenue in July 2020 could not sustain the recovery and fell by 14.3% to ₹87,422 crore yearon-year.
Abhishek Jain, tax partner at consulting firm EY India, attributed a significant part of the fall in revenue collection to imports that dropped mainly because of the pandemic’s impact on international trade.
“During the month [August 2020], the revenues from import of goods were 77% and the revenues from domestic transactions (including import of services) were 92% of the revenues from these sources during the same month last year,” the finance ministry statement said.
Experts said the collection figures denote that the economy is progressively on the recovery path. “Also, domestic collections having attained 92% year-onyear for operations in July is a sign of economic recovery” after the lifting of the lockdown, Jain, said.
“Coming in the backdrop of the disappointing GDP data for Q1 yesterday, these figures indicate that the collections are on the recovery path in the first month of Q2,” said MS Mani, partner at Deloitte India.
According to official data released on Monday, the Indian economy contracted by a record 23.9% in the first quarter (AprilJune) of 2020-21.
“The fact that the GST collection on domestic transactions is just 8% lower than the same month last year would indicate a revival of economic activities. The sharp drop of 23% in the import GST could be on account of the various import substitution measures announced in recent times,” Mani added.
According to Pratik Jain, partner and leader of the indirect tax practice at PwC India, imports still seem to be sluggish compared to domestic sales, indicating that there is still some disruption in international supply chain. He also pointed to tardy collections in August 2020 by some states such as Mizoram (-56% Y-o-Y), Manipur (-29%), Arunachal Pradesh (-22%) and Goa (-34%). “As things are opening up gradually, the collection is likely to be progressively better in coming months,” he added.
Some states such as Nagaland (17%), Jammu and Kashmir (8%), Uttarakhand (7%), Chattisgarh (6%), Uttar Pradesh (2%) and Rajasthan (1%) have recorded growth in revenue collections, the finance ministry said.
“The statewise data of GST collections indicates that the revival process has resulted in marginal collection increases in some states like Rajasthan and UP, marginal reductions in states like Haryana [-2%] and Gujarat [-3%] with significant dips in Maharashtra [-13%], Karnataka [-11%] and Tamil Nadu [-12%],” Mani said.
Providing a breakup of the revenue collection in August, the finance ministry statement said that of the gross revenue of ₹86,449 crore, central GST (CGST) contributed ₹15,906 crore, state GST (SGST) ₹21,064 crore, and integrated GST (IGST) ₹42,264 crore (including ₹19,179 crore collected on import of goods). The cess collected on luxury products and so-called sin goods amounted to ₹7,215 crore.