Sliding GST receipts likely to put pressure on government

Things don’t augur well for the exchequer, with recent rate cuts and a lenient implementation of the goods and services tax (GST) causing receipts to slide further in December, posing a challenge to the government.

Total GST receipts of the central and state governments, including taxes on inter-state supplies and the cess on certain items, added up to ₹80,808 crore in December.

This is a 14% drop from the collections in August, the first month of tax collection and return filing under the new indirect tax system that kicked in on July 1. Compared to the receipts in November, the December collection was marginally lower by 3%.

Lower-than-expected GST receipts, together with the extra spending that Parliament approved earlier this month involving a net cash outgo of ₹33,380 crore, is set to put pressure on the government in its efforts to limit this year’s fiscal deficit to 3.2% of GDP, a target set in February.

In the April-october period, the fiscal deficit scaled 96.1% of the ₹5.4 lakh crore targeted for the full year, according to data from the Controller General of Accounts. The government has so far managed to raise about three-fourths of the targeted ₹72,000 crore through disinvestment, according to information available from the finance ministry.

Net direct tax receipts, however, grew 14.4% to ₹4.8 lakh crore in the April-november period from a year ago. Faster economic growth in the latter half of the current fiscal year could give fresh impetus to revenue collection.

Experts attributed the decline in GST revenue to several one-off transition issues, which should fade in the coming months. For example, many of the steps taken by the federal indirect tax body, the GST Council, to address liquidity problems faced by businesses, including liberal tax refund rules, took effect in October. By February, when tax collections for the transactions in January will be available, most of the transition issues will have faded and revenue receipts will stabilise, explained Pratik Jain, leaderindirect tax, PWC India.

On November 10, the GST Council chaired by finance minister Arun Jaitley slashed tax rates on a large number of daily use items.