In continuance with the slide, the mop-up under the goods and services tax (GST) in November fell to just above Rs 80,000 crore – a decline that could be attributed to the rate reduction for more than 200 items in the same month and the use of the integrated GST (IGST) as credit for paying taxes. This will heighten the Centre’s fiscal concerns ahead of the Union Budget, dashing hopes of any further reduction in rates in the near future.
“The collection under the GST for November has been Rs 80,808 crore till December 25, 2017,” the government said in a release on Tuesday. The collections are lower than the Rs 83,346 crore in October and way below the average target of Rs 91,000 crore a month.
Experts say the GST collections will decline also in December and stabilise from January.
The slowdown has prompted the GST Council, in its meeting on December 16, to do a nation-wide roll-out of the electronic way bill on June 1 next year to plug revenue leakages and tighten enforcement.
The roll-out for inter-state movements of goods has been advanced to February 1 from April 1 decided earlier. As many as 5.31 million assessees filed returns for November (till December 25) out of the 8.24 million registered. The number does not include those under the composition scheme. Besides, those with an annual turnover of up to Rs 1.5 crore are allowed to file quarterly returns.
While Rs 13,089 crore was collected as the Central GST, Rs 18,650 crore was on account of the State GST, and Rs 41,270 crore was mopped up as integrated GST (IGST). The compensation cess accounted for Rs 7,798 crore.
A senior official in the Council said: “The focus of the Council will now be to stabilise the revenue position. Any decision on rate reduction will be taken after the Union Budget on February 1.”
The GST rate for 176 items, including detergents, shampoos, and beauty products, was reduced from 28 per cent to 18 per cent, while on two others to 12 per cent at the November 15 meeting, leaving only 50 items in the highest bracket.
The revenue slowdown has prompted the Union Finance Secretary Hasmukh Adhia to ask officers to review the revenue collections in the first five months compared to the corresponding period last year.
The government has also asked officers to send notices to the assesses who have failed to file returns. “The dip is on expected lines because the rates for over 175 items were reduced and refunds to exporters started recently,” said Pratik Jain, Leader-indirect Tax, PwC.
“Even for December, there could be an impact of opening credit claim for which the last date is December 27. From January onwards, the collections should stabilise,” he added.
Abhishek A Rastogi, Partner, Khaitan & Co, said: “It should be noted that refunds to a very substantial extent have not been processed. The government should keep that number in mind before forecasting. It is hoped that the refund process is not slowed due to decrease in collection.”
The government had earlier attributed the decline in revenue collections for October to the postponement of GST features like matching returns and the reverse charge mechanism.
“Though the reasons can be attributed to lowering rates in mid-November, the expansion of the tax base and buoyancy due to rate reduction should have ideally checked the dip in collections. If this continues, the government may be hesitant in further rationalising the GST rates,” Abhishek Jain of EY said.
Ansh Bhargava of Taxmann said GSTR-3B, a summary input-output form, was a kind of self-assessment return and businesses might not report accurate figures. Thus, there are chances that the collection of taxes came down because there was no fear of penalty for inaccurate details in this form, according to him.
M S Mani of Deloitte said lower collections in November depicted a trend where the collections seemed to be declining every month since July. "While the decline on account of rate reductions is understandable, the fact that there is a decline in compliance would be a matter of concern," he said.