GST collections fall below Rs 1-trn mark after eight months in June

Hit 10-month low due to second wave; experts say mop up is better than expected, will provide a cushion to govt to ramp up spending

Goods and services tax (GST) collection fell below the Rs 1-trillion mark in June -- the first time in nine months -- as the second wave of Covid-19 disrupted economic activity in the country, the official data showed on Tuesday. However, experts pointed out that the collection was better than expected and would provide cushion to the government to ramp up spending.

The GST mop-up in June stood at Rs 92,849 crore, as against Rs 1.02 trillion in May and Rs 90,917 crore a year ago, according to the data released by the finance ministry. The latest numbers pertain to transactions done in May, which saw localised lockdowns across the country in a bid to contain the spread of the pandemic. In April this year, the collection was at a record high of Rs 1.41 trillion.

The June collection was on expected lines as daily e-way bill generation, which indicates supply in the economy, declined to a one-year low of average 1.2 million in May.

“During May, most of the states and Union Territories were under either complete or partial lockdown due to Covid. The e-way bill data of May shows that during the month, 39.9 million e-way bills were generated as compared to 58.8 million in April 2021, down by more than 30 per cent,” the ministry said in a statement. “…Thereafter, the average generation of e-way bills has been increasing and has reached again to 2-million level since the week beginning June 20. Therefore, it is expected that while the GST revenues have dipped in June, they will see an increase again from July 2021 onwards,” it added.

The e-way bills generated during June have recovered to 55 million on account of the reduction in caseload and the easing of lockdowns, “which indicate recovery of trade and business”.

The GST collection includes domestic transactions between June 5 and July 5 as taxpayers were provided relief in the form of waivers and reduction in interest on delayed return filing for 15 days for the return filing month June for those with turnover of up to Rs 5 crore in the wake of the second Covid wave.

Aditi Nayar, chief economist, ICRA Ratings, said the pace of the moderation of GST collection was muted as compared to the extent by which e-way bills had fallen in the corresponding period (May 2021 vs April 2021) as state-level restrictions had widened. “Despite declining to a 10-month low, the June 2021 GST collection provided a positive surprise,” said Nayar. “Moreover, the collection in Q1 FY2022 is higher than the pre-Covid level of Q1 FY2020. This will buffer the revenue situation of the Centre and states, which should support a ramping up of expenditure going ahead,” added Nayar.

MS Mani, senior director, Deloitte India, said considering the fact that the collection was for transactions done in May, it is very satisfactory. “The numbers also reflect the economic resilience shown during the recent pandemic phase,” said Mani.

Key segments of GST collection yielded less in June compared to May. For instance, central GST collection stood at Rs 16,424 crore as against Rs 17,952 crore in May. State GST mop-up was Rs 20,397 crore as against Rs 22,653 crore in May. However, compensation cess was sharply lower at Rs 6,949 crore compared to Rs 9265 in May.

During June, the government settled Rs 19,286 crore to CGST and Rs 16,939 crore to SGST from IGST as regular settlement. In addition, the government also did a regular integrated GST settlement of Rs 19,286 crore to CGST and Rs 16,939 crore to SGST.

The government has also been managing robust GST collections due to tightened enforcement through closer monitoring against fake-billing, deep data analytics using data from multiple sources including GST, income-tax and customs IT systems and effective tax administration. Easier compliance also encouraged return filing.