GST collections drop to Rs 97,247 cr in Feb; rate cuts may have hit mop-up

The goods and services tax (GST) collections fell to Rs 97,247 crore in February, dropping marginally from a mop-up of Rs 1.02 trillion in January.  

This was the eighth month in 2018-19 when the GST collection could not hit the Rs 1-trillion mark, an original monthly target set for the current financial year. However, with a lower revised target presented in the interim Budget, the pressure to meet the target has eased.

Experts said the reduction of rates for 23 items that took effect from January 1, 2019, could have had downward impact on revenue to some extent. The February collections represent the revenue collected for business activities in January 2019.

Abhishek Jain, tax partner at EY India, said: “While the GST collections are in line with the average collection in this fiscal year, it has witnessed a slight dip vis-à-vis the previous month; a possible reason being the impact of rate rationalisations effective January.”

The list of items taxed at 28 per cent was pruned to just about seven in the December meeting of the GST Council, with mass consumption products such as auto parts, small TV screens and batteries now facing a reduced tax rate.

The February figure reflects a year-on-year growth of about 13 per cent. However, the average monthly collection in 2018-19 has grown about 8 per cent than that in 2017-18.

“We have seen that collection of over Rs 1 trillion in a month has typically come at the end of a quarter only, so a slight reduction doesn’t seem to be a cause for worry,” said Pratik Jain, partner PwC India.

 

Looking at the Centre’s revenue mobilisation, Central GST (CGST) collections in the fiscal year to January have touched Rs 3.75 trillion, according to data from Controller General of Accounts (CGA). Adding the Rs 37,095 crore accrued to the CGST account — including Integrated GST (IGST) settlement — in February, it adds up to nearly Rs 4.13 trillion in 11 months.

To meet the lower revised target for 2018-19, the government needs to add Rs 92,269 crore to the CGST account in March 2019. The government expects to meet this by using unclaimed funds on the compensation cess and ad hoc IGST distribution. CGST alone yielded nearly Rs 37,000 crore in February.

The recent cuts in GST on the housing sector may impact GST collection in the coming financial year, but the impact would be felt only in May 2019 collections.
 

“It will be interesting to see the number with effect from April 1, the date from which the rate for real estate services is reduced,” said Abhishek A Rastogi, partner at Khaitan & Co.

Jain said the real question is the way in which the government plans to achieve the next year’s target which is around 20 per cent higher than this year, with little leg room to increase the rates. “Tax evasion and leakages still seem to be a huge problem for the government,” he added.

Revenue collected as State GST (SGST) touched Rs 24,192 crore in February. The Union and state governments collected Rs 46,953 crore as IGST.

The Union government settled Rs 35,217 from the IGST account to the Centre and states, in which the former got a bigger share of Rs 19,470 crore, about 55.3 per cent.