CONTINUING TO post a year-on-year increase for the second month in a row, gross Goods and Services Tax (GST) collections rose 10.2 per cent to an eight-month high of Rs 1.05 lakh crore in October, for sales in September.
An uptick in economic activity with the easing of Covid restrictions, along with a low base effect and a September 30 deadline for claiming input tax credit and reconciliation for businesses for 2019-20, were the key factors for the rise in revenues under the indirect tax regime.
In October 2019, GST revenues had contracted by 5.29 per cent to Rs 95,380 crore, marking the third instance of a contraction since the July 2017 rollout of the GST regime.
The pick-up in gross GST revenues in October reflected the 9 per cent growth in revenues from import of goods and 11 per cent growth in revenues from domestic transactions, including the import of services.
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Annual reconciliations before the September 30 deadline are also likely to have led to an increase in the filing of returns in September as companies would have asked their vendors to fill in and report missing transactions, tax experts said.
Abhishek Jain, Tax Partner, EY said: “This uptick in collections on a month-on-month basis and over the same month last year is quite a welcome one for the government and the economy in particular. Some potential reasons for this surge could be the demand on account of the festivities and input tax credit/ other similar reconciliations which were due for businesses in September.”
The uptick in October is due to the pick-up in economic activity for the festival season, the unlockdown and a September deadline for annual reconciliation of input tax credit for businesses. Collections after November will indicate whether the trend is sustainable.
Experts said GST revenues are expected to rise in November as well but it needs to be seen if the uptrend will sustain beyond the festive month.
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Pratik Jain, Partner & Leader, Indirect Tax, PwC India, said: “One of the reasons for the higher number of returns could be the fact that the last date for claiming input credit for 2019-20 was September 30 and a lot of companies would have carried out an yearly reconciliation and asked their vendors to file returns or report missing transactions. Given the festivities, collections in November could also be robust. We would need to see if this trend continues after November as well.”
Sequentially, GST revenue in October recorded a 10.1 per cent increase from Rs 95,480 crore collected in September. Cumulatively, the GST revenues have recorded a year-on-year 20.2 per cent decline during April-October for sales in March-September.
“The growth in GST revenue as compared to that in months of July, August and September, 2020, of -14%, -8% and 5%, respectively, clearly shows the trajectory of recovery of the economy and, correspondingly, of revenues,” the Finance Ministry said in a statement.
Out of Rs 105,155 crore collected in October, Rs 19,193 crore is Central GST; Rs 25,411 crore State GST; Rs 52,540 crore Integrated GST, including Rs 23,375 crore collected on import of goods; and, Rs 8,011 crore Cess, including Rs 932 crore on import of goods, the statement said.
The government settled Rs 25,091 crore to CGST and Rs 19,427 crore to SGST from IGST as regular settlement. After this, the total revenue earned by Centre is Rs 44,285 crore as CGST and by states is Rs 44,839 crore as SGST, the Ministry said.
The detailed break-up for GST collections raised in various states showed that barring Union Territories and some northeastern states, most states recorded a year-on-year growth in October.
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