GST continues to pose problems even after 18 months of its roll out

Even a year and a half after its launch, the goods and service tax (GST) regime continues to pose grave problems for the central government’s fiscal maths. 

While monthly collections have crossed the Rs 1 trillion mark twice in the current year, they remain well below the desired monthly run rate. This is despite the number of returns filed rising to 6.96 million in October, up from 6.75 million in September. 

On its part, the government had hoped that compliance under the new indirect tax regime would improve with the introduction of the e-way bill. However, data on Integrated GST (IGST) domestic collections does not suggest a sustained increase in tax collections.

For the government to meet the budgeted indirect tax  target,  collections would have to rise to Rs 1.33 trillion per month for the rest of the current financial year, says a report by Kotak Institutional Equities. Part of the shortfall could be plugged by distributing the unallocated portion of the GST compensation cess between the central and state governments. Or, the Centre could hold onto IGST collections. Despite this, the Centre is staring at a huge gap in indirect tax collections, which the report pegs at Rs 800-900 billion.