Gross Goods and Services Tax (GST) collections fell to a 19-month low of Rs 91,916 crore in September, reflecting weak consumption demand amid the overall economic slowdown. GST collections in September contracted 2.7 per cent from Rs 94,442 crore the same period last year, marking the second only instance of a contraction since the July 2017 rollout of the indirect tax regime.
GST collections are expected to be hit further as the recent rate cuts announced by the GST Council on September 20 will come into effect from October 1, leaving no room for further rate cuts.
The GST Council had slashed tax rates for hotels with tariff of over Rs 1,000 by clubbing categories and moving them down the slabs, and reduced the rate for outdoor catering to 5 per cent from 18 per cent (without input tax credit), with the revenue loss is estimated to be around Rs 1,500 crore a year,
Tax experts said the contraction in GST collections, coupled with low direct tax collections so far, have renewed concerns of an impending shortfall in the government’s revenue targets as detailed in Budget 2019-20. Direct tax collections are already crawling, with net direct tax collections during April 1-September 15 growing at just 5 per cent to Rs 4.4 lakh crore, suggesting the government would have to raise more than double this amount over the next six-and-a-half months to meet the Budget estimate of Rs 13.35 lakh crore.
The slowing revenues are being seen as a risk not only for Centre’s revenues but also for states. “The YoY decline in the headline GST collections in the month of September 2019 and the sub 5 per cent growth in H1 FY2020, have reinforced concerns regarding impending shortfalls in the government’s indirect tax collections relative to the budgeted target for FY2020.
Govt’s task to meet revenue targets gets more difficult
The contraction in GST collections, coupled with flagging direct tax collections, have renewed concerns of an impending shortfall in the government’s revenue targets as detailed in Budget 2019-20. Net direct tax collections during April 1-September 15 grew at just 5% to Rs 4.4 lakh crore, which means the government would have to raise more than double this amount over the next six-and-a-half months to meet the Budget estimate of Rs 13.35 lakh crore. The slowing revenues would impact not just the Centre’s revenues, but could have implication for states.
This is a risk not only for the central government’s fiscal situation, but also for the state governments, which receive 42 per cent of shareable central taxes as central tax devolution. Therefore, lower-than-budgeted GST collections would likely reduce the central taxes devolved to the states in FY2020, which may necessitate expenditure cutbacks at the state government level,” Aditi Nayar, principal economist, ICRA said.
Out of the total Rs 91,916 crore GST revenue, Central GST (CGST) is Rs 16,630 crore, State GST (SGST) is Rs 22,598 crore, Integrated GST (IGST) is Rs 45,069 crore (including Rs 22,097 crore collected on imports) and cess is Rs 7,620 crore (including Rs 728 crore collected on imports).
The compliance rate, however, improved slightly from the previous month with total number of GSTR 3B returns at 75.94 lakh filed for August till September 30 as against 75.80 lakh last month.
Overall gross GST collections, which include Centre’s and states’ revenues, were Rs 6,06,294 crore in April-September, with the average monthly collection at Rs 1.01 lakh crore as against the average of Rs 98,114 crore a year ago.
The government aims to collect approximately Rs 11.89 lakh crore GST revenue on a gross basis. The monthly targeted rate is about Rs 99,112 crore, a result of the sharp cut in Budget targets in July from the interim Budget’s targeted rate of Rs 1.14 lakh crore that was presented in February.