The goods and services tax (GST) collection recovered to a three-month high in July, exceeding the Rs 1.1 trillion-mark, as economic activity resumed after most states eased Covid-19 restrictions, the official data showed. The better-than-expected collection should help the government ramp up spending in a bid to revive economic growth.
The GST mop-up in July stood at Rs 1,16,393 crore, against Rs 92,849 crore in June, according to the data released by the finance ministry. The collection figure for July included a Rs 4,937-crore mop-up, which was already accounted for in the figures released in June. It pertained to the returns filed between July 1 and July 5 as taxpayers with aggregate turnover up to Rs 5 crore were allowed waiver of/reduction in interest on a 15-day delay in the filing of returns for June, in the wake of the second Covid-19 wave.
On a year-on-year basis, the July GST collection witnessed a 33 per cent jump. The latest numbers pertain to transactions done in June.
In April this year, the collection was at a record high of Rs 1.41 trillion. The mop-up had slipped below the Rs 1-trillion mark in June for the first time in eight months, as India faced a brutal second wave of Covid, forcing a large part of the country to enter lockdowns.
The July collection was on expected lines, with the daily e-way bill generation -- which indicates supply in the economy -- recovering to a daily average of 1.8 million in June, against 1.2 million in May.
“…With the easing out of Covid restrictions, the GST collection for July 2021 has again crossed Rs 1 trillion which indicates that the economy is recovering at a fast pace. Robust GST revenues are likely to continue in the coming months, too,” said the finance ministry in a statement.
During the month, the revenue from the import of goods was 36 per cent higher and the revenue from domestic transactions (including import of services) was 32 per cent higher on a YoY basis.
Aditi Nayar, chief economist, ICRA Ratings, noted while the GST collection in July displayed “a heartening sequential increase”, the level remains well below the all-time high in April.
“In our view, this is further evidence that the graduated unlocking in June 2021 has triggered an incomplete recovery, which is expected to strengthen in July 2021, further boosting the August 2021 GST collection. The pace of growth across states was highly uneven in July 2021, with some industrial heavyweights recording a sharp expansion,” Nayar added.
Among large industrial states, Maharashtra posted 51 per cent YoY growth in the mop-up; Tamil Nadu witnessed a 36 per cent jump in July. Resource-rich Jharkhand and Odisha posted 54 per cent growth.
M S Mani, senior director, Deloitte India, said the sharp increase in the collection indicates resumption of economic activity in June and this further raises expectations of a better collection in the coming months. “The improvement in the GST collection, from both domestic transactions and imports, accompanied by the fact that major producing states have shown significant increases, indicates that economic activity has resumed across the country,” said Mani.
Key segments yielded more in July than June. For instance, the central GST collection stood at Rs 22,197 crore against Rs 16,424 crore in June. The state GST mop-up was Rs 28,541 crore in July, against Rs 20,397 crore in the previous month. But compensation cess was at Rs 7,790 crore; it was Rs 6,949 crore in June.
During June, the government settled Rs 28,087 crore to CGST and Rs 24,100 crore to SGST from IGST as regular settlement. In addition, the government also did a regular integrated GST settlement of Rs 50,284 crore to CGST and Rs 52,641 crore to SGST.
The government is also managing a robust GST collection due to tightened enforcement through closer monitoring against fake billing, deep data analytics, and effective tax administration. Easier compliance also encouraged return filing.