April GST mop-up notwithstanding, Rs 1.5 trn a month may not happen in FY23

CBIC to focus on scrutiny of returns and audit for better compliance during current fiscal; finance ministry official sceptical, says April usually has high collection due to payment of arrears

The record collection from the goods and services tax (GST) of Rs 1.68 trillion has raised hopes that finally the near five-year-old indirect tax regime may yield Rs 1.5 trillion a month sooner than later. However, this may not happen during the current financial year.

A key finance ministry source said achieving Rs 1.5 trillion a month is difficult during 2022-23.

"My hunch is that the average revenue per month may go up to Rs 1.3-1.35 trillion this financial year," he said.

The Central Board of Indirect Taxes and Customs (CBIC) will focus on two things for better compliance during the current financial year, another official said. One is scrutiny of returns and the other is their audit.

"We were extending the time period of filing of annual returns. We were unable to conduct scrutiny or audit till annual returns were filed. Now since the extended period of filing those returns is over and we have annual returns for 2017-18 and 2018-19, we have started the scrutiny process," he said.

On April 1, some 35,000 returns were sent to the field formation for scrutiny, the official said.

"Once we do the scrutiny, we will be sure of how accurate the information in returns is. Scrutiny will be done in non-intrusive ways without calling for additional document. We expect some additional revenues from this. Then we will also do auditing of returns. This will reconcile returns with the books of companies," he said.  

Hitting Rs 1.5 trillion a month GST receipts would require the GST-GDP ratio to be about seven per cent, assuming the size of the economy is Rs 258 trillion, as projected in the Budget, for 2022-23.

One of the officials cited above explained that GST collections tend to be higher at the end of the quarter as 4.8 million taxpayers opt for  quarterly filing of returns.

Besides, April usually has high collection figures because of the payment of arrears, he explained.

Average tax collections stood at Rs 1.23 trillion during 2021-22. This is much higher than Rs 1.03 trillion if one takes a cue from revised estimates and assumes receipts from Central GST as equal to State GST.

Calculating the same way from the Budget Estimates, GST collections should yield Rs 1.2 trillion in the current financial year. However, as cited above the finance ministry believes that the revenues could be much higher at Rs 1.3-1.35 trillion a month for the year, but not as high as Rs 1.5 trillion.

Independent experts agree with this view.  

Rajat Mohan, senior partner at AMRG & Associates, said, "I feel that if in 2022-23 GST collections stabilise at Rs 1.3 trillion, it would be sufficient."

He said achieving Rs 1.5 trillion in 2022-23 is impossible, unless some big-ticket changes are made, which may include  crackdown on the crypto eco system, increase in tax rates, and widening the scope of GST.

The next GST Council meeting, expected later this month, may take up the issue of rationalising tax rates. A group of ministers is already looking at the issue.

Icra chief economist Aditi Nayar said, "At present, we expect GST collections to average around Rs 1.4 trillion per month in FY23." She added that if higher commodity prices transmit into output prices in a broad based manner, that would boost GST collections as well.

However, some experts believe that Rs 1.5 trillion a month on an average may be collected this financial year.

M S Mani, partner at Deloitte, said, "We are progressing towards that target and we should be able to achieve it during FY23, provided there are no economic headwinds for the country."

Harpreet Singh, partner, indirect taxes at KPMG in India, said in spite of the current geopolitical situation, the rise in oil prices, inflation and supply chain bottlenecks, GST collections in recent months have been encouraging.

He said with over 100 ships stranded in the black sea, sectors such as pharmaceuticals, machinery, aerospace, and chemicals have been impacted. Also, the price rise in commodities like rhodium, neon gas and coal has impacted manufacturing of semiconductors and cement, with consequent impact on automobile and real estate sectors respectively, Singh said.

“Once above bottlenecks are negated, and there are no further Covid-driven lockdowns, with enhanced GST audits, investigations, assessments, one can expect the target of Rs 1.5 trillion monthly GST collections as achieved in April, to be achieved on a sustainable basis,” he added.

Table:  GST collections since 2017-18

Parameter	2017-18*	2018-19	2019-20	2020-21	2021-22	2022-23**
GST collections (Rs trn)	7.18	11.77	12.22	11.37	14.83	14.4
Growth in GST collections YoY	.	9.75#	3.8	-6.95	30.43	-2.9
Average monthly GST collections (Rs trn)	0.9	0.98	1.02	0.95	1.23	1.2
GST as % of GDP	.	6.23	6.09	5.74	6.27@	5.58

Notes:

* Eight months (August to March)

** Budget Estimates and Assumption

# Growth in eight months (August to March)

@ GDP as projected in second advance estimates

Source: GST Council site, finance ministry, MoSPI