GST mop-up crosses Rs 1 trn in Nov over festive demand, anti-evasion steps

Goods and services tax (GST) collection recovered to a seven-month high in November, crossing the Rs 1-trillion mark on account of the festive season demand and anti-evasion measures by the government.

After two months of negative growth, the GST mop-up grew by 6 per cent in November over the corresponding period last year to Rs 1.03 trillion, against Rs 95,380 billion in October, the data released by the Ministry of Finance showed on Sunday. These figures are for October, collected in November. 

Although the collection figures come as a breather for the government, it is lower than the expected collection rate needed to meet the steep target for 2019-20 (FY20). 

The government’s monthly GST collection target is around Rs 1.18 trillion.   Being a festival month, GST collection on domestic transactions witnessed a 12 per cent growth — the highest during the year. GST collection on imports continued to see negative growth of (-)13 per cent, against (-)20 per cent in October.

 “This is the eighth time since the inception of GST in July 2017 that the monthly collection has crossed the Rs 1-trillion-mark. Also, the November 2019 collection is the third-highest monthly collection since the introduction of GST, next only to April 2019 and March 2019 collections,” the Ministry of Finance said in a release.

Pratik Jain, partner, PwC India, said that while the increase in collection was encouraging, it is difficult to read too much into the numbers for one month, particularly because October was also a month of festivals. “We need to see what the trend is. The Centre has taken steps in the right direction by simplifying compliance, going after tax evaders with more efficient use of technology/data analytics, and not succumbing to the temptation of increasing tax rates. These efforts, coupled with the introduction of e-invoicing from next year, should lead to a gradual increase in GST collections as well, though it would also depend upon the overall economy,” said Jain.

Central GST (CGST) collection stood at Rs 19,592 crore, against Rs 17,582 crore in October. State GST collection was Rs 27,144 crore, up from Rs 23,674 crore in the previous month. The integrated GST mop-up was also higher at Rs 49,028 crore, against Rs 46,517 crore in the previous month.

“The festival season in the month of October caused the rise in revenue figures. Moreover, another major reason for the increase in revenue is the insertion of a new provision which allows credit only to the extent of 120 per cent of invoices available in GSTR-2A as maximum input tax credit. This must have forced taxpayers to discharge liability in cash instead of input tax credit, as all invoices are not uploaded by their supplier,” said Vishal Raheja, deputy general manager-GST, Taxmann.

In order to plug revenue leaks, the government in October decided to restrict input tax credit to 20 per cent of the eligible amount for an entity if its supplier has not uploaded relevant invoices detailing the payments made.

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 7,727 crore during the month, which appears much smaller than the approximately Rs 13,000-crore compensation going out to states on a monthly basis. States are up in arms with the Centre over a delay in payment of compensation dues for August and September, which was to be cleared by October under the bi-monthly payment mechanism.

The exchequer is staring at an overall shortfall of over Rs 2 trillion for the fiscal year. A 12-member panel comprising officers from the Centre and the state was formed in October to recommend measures for revenue augmentation in GST. The panel is examining a mechanism to plug evasion lacunae and increase rates where necessary. 

The steep growth target of 16 per cent for CGST 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.

M S Mani, partner, Deloitte India, said that crossing Rs 1 trillion in a festive month after a few months of tepid collections would act as sentiment booster and help in keeping fiscal deficit under control, hoping the trend continues in the coming months.

The total number of GSTR-3B returns filed for the month of October up to November 30, 2019, was Rs 77.83 lakh.

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.

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