The goods and services tax (GST) mop-up fell below the Rs 1-trillion-mark for the first time in four months in June. It grew by a meager 4.5 per cent to Rs 99,939 crore, against 6 per cent growth in May, according to data released by the Ministry of Finance on Monday.
The target in the interim Budget, along with projected growth in state GST (SGST), required collections to touch Rs 1.3 trillion a month. With this shortfall, the target might become daunting if it is retained in the full Budget for fiscal year 2019-20 (FY20), to be presented in Parliament this Friday.
The GST revenue for March was Rs 1.06 trillion; for April, it was Rs 1.13 trillion; and in May, it touched Rs 1 trillion. This reinforces the need for data intelligence and policies to plug revenue leakages.
Revenue collections are a major challenge for Finance Minister Nirmala Sitharaman. In the interim Budget FY20, the growth target for the central GST (CGST) was 33 per cent.
The CGST collection fell 9 per cent short of the revised target at Rs 4.5 trillion, against the Revised Estimate of Rs 5 trillion for 2018-19.
Experts are of the opinion that the government might take some steps to boost revenue collections.
“This moderate growth in collections (over the past year) would be a concern and we should expect some tangible measures in the form of increased audits and scrutiny over next few months… This may also get the government to rethink about the projected GST collection in 2019-20, which we will get to know when the Union Budget is presented later this week,” said Pratik Jain, partner, PwC India.
The CGST revenue in June 2019 stood at Rs 18,366 crore, the SGST at Rs 25,343 crore, and integrated GST (IGST) at Rs 47,772 crore (including Rs 21,980 crore collected on imports) and cess collection was Rs 8,457 crore (including Rs 876 crore collected on imports), according to the government data.
The total CGST collections in the first three months even after IGST distribution stood at around Rs 1.2 trillion. Over Rs 1.5 trillion that was required to meet the target of Rs 6.1 trillion in FY20.
The government is working on measures to plug tax evasion, including data analysis, new return formats, the e-way bill system, a proposed e-invoicing system, mandatory e-ticketing for movie theatres among others.
With collections falling, the possibility of a cut in the GST is unlikely — especially for those items which are in the 28 per cent slab. In the last GST Council meeting, a tax cut was considered for only one item — electric vehicles. The proposal to reduce levy from 12 per cent to 5 per cent was moved to the fitment committee for consideration.
Experts reiterated this.
“The marginal dip in collections reinforces the point that there is very little headroom at present for any further rate reductions. The lower-than-expected collections would lead to more analysis of the data available with the GST Network (GSTN) to detect and plug any leakages,” said M S Mani, partner, Deloitte India.
In its December 2018 GST Council meeting, rates were cut on 23 goods and services, including movie tickets, TVs, monitors, and power banks. Frozen and preserved vegetables were exempted from the levy.
In July last year, consumer durables such as small-screen TVs, refrigerators and washing machines were moved from the 28 per cent slab to the 18 per cent slab.
There might also be a crackdown with the GSTN and the income tax department getting into a memorandum of understanding to facilitate exchange of data to nab defaulters.
According to a written reply in the Lok Sabha, FM Sitharaman said the data showed the authorities detected fraudulent GST invoices to the tune of Rs 11,251.23 crore in 2018-19, against Rs 12.67 crore in the first night months after the roll-out of the GST in July 1, 2017. Till June 26 this year, the amount of detected fraud was Rs 2,565.4 crore.
At an event on Friday to celebrate the second anniversary of the GST launch, Minister of State for Finance Anurag Thakur cautioned traders and businesses against issuing fake invoices.