October was the second month when the collection declined year-on-year. In September, it was down 2.7 per cent.
“This is the second consecutive month when collection is less than in the corresponding period last year,” said Pratik Jain, partner, PwC India.
This is expected to compound the government’s revenue woes amid a steep target for 2019-20. The government’s monthly GST collection target is around Rs 1.18 trillion.
M S Mani, partner, Deloitte India, said the trend of lower-than-expected GST collection was possibly reflective of the slowdown in the economy. “Since GST is a consumption tax, lower collections during the past few months are possibly indicative of the decline in consumer spending,” he added.
Collection in October was mainly for the month of September, which was a pre-festive month. Experts hope GST for October, which will be collected in November, may give some indication of a demand pick-up.
For November, collection should be better, given the festivities in October, Jain said.
“While with simplification of compliances and tightening of administrative measures, collection could slightly improve in next few months, there is definitely a need of stimulus to spur demand,” he said.
The next month's collections, which will cover the festive period, will provide critical cues as to the extent of slippage that one could expect in the GST collections
in FY20 relative to the budgeted target, Aditi Nayar, principal economist at ICRA, said.
“With festivities in October, these numbers should witness a rise and meet expectations in the coming month,” said Abhishek Jain, partner at EY. Central GST collections
stood at Rs 17,582 crore in October, compared to Rs 16,630 crore in September. State GST collections
were Rs 23,674 crore versus 22,598 crore in the previous month. The integrated GST mop-up was also lower at Rs 46,517 crore as against Rs 50,612 crore in the previous month.
Grim revenue position posed a grave challenge for the government, with the exchequer staring at an overall shortfall of close to Rs 2 trillion for the fiscal year. A 12-member panel comprising officers from the Centre and the state was formed last month to recommend measures for revenue augmentation in GST. The panel is examining mechanism to plug evasion loopholes and increase rates where necessary.
The steep growth target of 16 per cent for the central GST in FY20 will likely be revised downwards in the upcoming Budget in February. The CGST collection target was, in fact, revised downwards to Rs 5.26 trillion for the fiscal year from Rs 6.1 trillion estimated in the interim Budget, following a 9 per cent shortfall in the actual collection for the previous year.
“Weak demand, low GDP growth rate and decline in industrial output could be the reasons for decline in GST revenue in October,” said Vishal Raheja, DGM, Taxmann.
Lower-than-expected revenues are also putting pressure on the Centre to compensate states for the revenue shortfall.
The compensation cess collection stood at Rs 7,607 crore during the month, which appears much smaller than the approximately Rs 13,000 crore compensation going out to states on a monthly basis. There was a shortfall of around Rs 24,000 crore between the GST compensation cess collected till August and the compensation disbursed to states to meet the revenue shortfall.
The number of returns filed for the month of September, up to October 31, was 738.3 million.
India’s GDP growth fell to a six-year low of 5 per cent in the April-June period.
The government is working on measures to plug tax evasion, including data analysis, new return formats, e-way bill, e-invoicing, and mandatory e-ticketing for movie theatres.