In a significant rebound, goods and services tax (GST) collection posted growth in September after six months of contraction, indicating a return to normalcy in economic activities after months of disruption caused by lockdown.
The robust mop-up may be an outcome of restocking ahead of the festival season in October, economists suggested.
The data comes in the backdrop of simmering tension between the Centre and states over the promised compensation and ahead of the Council meeting on Monday.
GST collection stood at Rs 95,480 crore in September against Rs 86,449 crore in August, the data released by the finance ministry showed on Thursday. The collection stood at Rs 91,916 crore in September last year.
Still reeling from the pandemic shock, the mop-up remains well below Rs 1 trillion for the seventh straight month even as unlocking began in June. GST collection had crossed Rs 1 trillion in seven months of the previous fiscal year.
Aditi Nayar, principal economist, ICRA, said while the year-on-year uptick in collection came as a relief, “its sustainability remains unclear because it has likely been driven by a combination of pent-up demand and inventory restocking”.
Central GST collection stood at Rs 39,001 crore in September as against Rs 34,122 crore in August.
State GST collection was Rs 40,128 crore in August, higher than the Rs 35,714 crore in the previous month.
Integrated GST mop-up was also higher at Rs 47,484 crore as against Rs 42,264 crore in August.
“With the festive season coming, though muted, one hopes collection improves. Measures such as e-invoicing should also help plug tax leakage,” he said. The ministry said in an official release: “During the month, revenues from imports of goods were 102 per cent and the revenues from domestic transactions (including import of services) were 105 per cent of those from these sources during the same month last year.”
Abhishek Jain, tax partner, EY, said: “With a significant part of the economy resuming operations and international trade gathering pace, collection has shown decent growth. The increased revenues indicate reinstatement of normalcy in business operations and provides an optimistic outlook.”
Compensation cess collection was at a four-month low of Rs 7,124 crore in September, against Rs 7,215 crore the previous month and Rs 7,148 crore in September last year.
The GST Council meeting, scheduled for Monday, is set to be a stormy one with several opposition-ruled states expected to reject both the borrowing options proposed by the Centre to meet the compensation requirements.
About 11 states and Union Territories posted double-digit expansion in collection on account of domestic transactions. Chhattisgarh, Rajasthan, and Odisha posted 24 per cent, 17 per cent, and 18 per cent growth, respectively.
Tamil Nadu and Kerala saw the mop-up grow 15 per cent and 11 per cent, respectively. Uttar Pradesh saw no growth in collection compared to last year, while in the case of Delhi it was a 7 per cent contraction.
“… With some key large states also reporting increased collections, if the present trends of GST collections continue, we should be hopeful of significant increases in the coming months based on the unlockdown steps taken in various states and the festival season ahead,” said M S Mani, senior director, Deloitte India.