Share of GST revenue from imports nearly constant since 2014

GST revenue from imports - The Indian imports have grown especially from China and so is import IGST. But as a proportion of total GST collections, revenue from imports has remained the same.

Towards the end of her Budget 2022 speech, finance Minister Nirmala Sitharaman was handed a piece of paper which she read out to announce that GST revenue in January 2022 had touched nearly Rs 1.41 trillion.

The treasury bench MPs cheered because of the highest monthly revenue figure since GST came into being.

In fact, GST revenue has been so buoyant that January’s figure is the 14th time in the last 16 months that collections have been higher than Rs 1 trillion and the 12th time they have crossed Rs 1.1 trillion.

This streak was only broken in May and June of 2021 due to the second wave of the coronavirus (Covid-19) pandemic.

A lot was written earlier when collections were refusing to pick up that low collections highlighted all the flaws in GST.

But now that collections are picking up, commentators have switched tracks. They have taken to dissecting the numbers to see if there is indeed a revival of manufacturing and the criticism is that GST collections have been so high because they are being propped up by higher collections from IGST.

The theory being advanced is that since the Covid-19 pandemic has dealt a body blow to domestic manufacturing, imports, especially from China, have grown and tax revenue collections from those are what are keeping GST collections high.

Well, yes and no. It’s true that India’s imports have grown, especially from China and so has the import component of IGST collections which has grown 28 per cent over the last year.

But it is also true that, as a proportion of total GST collections, revenue from imports has remained the same ever since the beginning of GST.

If you look at GST collections in July 2018, one year after the tax came in, they stood at Rs 96,483 crore. Of this, the import component of IGST was Rs 24,852 crore, or 25.8 per cent.

Since then, it has remained in the 20-25 per cent range, and came in at 25.4 per cent in January 2022.

In fact, when compared to the pre-GST tax collections, the current numbers might actually indicate a lower reliance on import tax collections.

Customs duty collections for the year ended March 31, 2016 made up 28.5 per cent of total indirect tax revenue. It’s harder to say what this proportion was in the subsequent years because Demonetisation in 2016-17 and the implementation of GST four months into 2017-18 have made those years unrepresentative.

In recent years, tax revenue from imports has grown more or less at the same rate as tax revenue from domestic supplies.

What all these numbers reveal is not a worryingly increasing reliance on import tax revenue. Instead it shows the long, arduous road ahead to a truly Atmanirbhar Bharat.

The blatantly anti-competitive practices by China at the start of this millennium meant that India’s intermediate manufacturing sector was effectively wiped out.

Companies across India simply switched to using intermediate goods imported from China at a fraction of the cost.

But what this also meant was that, as the sale of finished goods increased in India, the country’s imports from China increased commensurately. The two are inextricably linked now.

If India wants to truly become atmanirbhar, it is going to have to break this link and focus on the production of intermediate goods within the country. Ancillary industries are what need a boost.

A specific medium-term plan to boost the ancillary sectors would have gone a long way in achieving the goals of atmanirbharta, employment generation and, as a bonus, sticking it to China. Sadly that opportunity has been missed.