Collection under the goods and services tax (GST) slowed to Rs 83,346 crore for October, as the Integrated GST was utilised for credits and rates were revised downward. It was the lowest monthly collection since the GST roll-out in July.
The receipts, shared between the Centre and states, were down despite October being a festival season, and also due to the fact that 48 per cent did not file returns. The subdued collection could further affect the already worsening fiscal position of the Centre and states. The collection for October was down 9.5 per cent from Rs 92,150 crore for September; the target for a month is Rs 91,000 crore. The target was derived on the basis of the year’s Budget Estimates of the government and 14 per cent growth over the receipts of 2016-17 for the states.
Collections for November could be even lower, as the rates of over 200 items were lowered, against 27 for October.
The finance ministry attributed the slowing to utilisation of the IGST for credit, rate cuts, and self-declared tax payments. It said the tax administration of the GST was now based on self-declared tax returns, in which the assessee decides how much tax liability he has and accordingly claims input tax credit. “Since implementation of some of the main features of GST such as matching of returns, e-way bill and reverse charge mechanism have been postponed, tax compliance might not be up to the mark,” it said. About 62 per cent filed out of a total of 8.1 million expected to.
Tax experts said items which saw a cut in rates such as khakra, ‘aam papad’, unbranded namkeens and unbranded ayurvedic-unani medicines are not those which fetch much revenue.
Also that IGST credit was there for the months of August and September as well.
The ministry contended that because of the first-time requirement of paying IGST on transfer of goods from one state to another even within the same company, there was an additional cash flow of IGST in the first three months. “As and when the final transaction of these goods takes place, the credit for IGST is being utilised for payment of State GST (SGST) and Central GST (CGST). Therefore, the inflow of new taxes is low,” it argued.
M S Mani of consultancy Deloitte said, “The reduction in collections need to be viewed in the light of the lower return filings, which could be due to the multiple changes made in the return filing dates, leading to lower compliance fulfilment.”
Pratik Jain of consultants PwC felt the collection for November might also be on the lower side, due to substantial rate cuts from the mid-month.
“While, to a large extent, the shortfall is likely to be offset by increase in demand, the results might take another two-three months to become visible. The correct picture might emerge by the end of December, when we have six months data to look at. Collection may improve once invoice matching starts, hopefully in the next couple of months,” he said.
The Centre collected Rs 58,556 crore from CGST for the first four months. Beside, Rs 16,233 crore has been transferred from the IGST to the CGST account. States have collected Rs 87,238 crore by way of SGST for the first four months of GST rollout.
Further on all inter-state trade, a net amount is transferred from the IGST account to the SGST one whenever the IGST collected is used for payment of SGST. By way of settlement, an amount of Rs 31,821 crore has been released to the states for the first three months; Rs 13,882 crore is being released for November, the ministry said.
A compensation amount of Rs 10,806 crore has been released to all states for the first two months and Rs 13,695 crore for the next two months. “States’ revenues have thus been fully protected,” the ministry said.
Abhishek Jain, tax partner at consultants EY, said rate cuts would impact GST collections for November. “More, revenues might be further impacted as pending export-related refunds in the range of about 50,000 crore are disbursed by the government.”