August 2022 GST collection has topped 1.43 lakh crore — how did this happen, and why is it significant?

The recovery, alongside better compliance amid enforcement actions to curb evasion, also bolstered revenues. GST revenues also gained because revenues from import of goods were 57 per cent higher, and revenues from domestic transactions (including import of services) were 19 per cent higher.

What is the government’s assessment of the higher GST revenues?

Monthly GST revenues have remained above the Rs 1.4 lakh crore mark for the last six months. The Finance Ministry in its statement on Thursday said that the year-on-year growth in GST revenue during April-August 2022 is 33 per cent, and is continuing to “display very high buoyancy”. “This is a clear impact of various measures taken by the Council in the past to ensure better compliance. Better reporting coupled with economic recovery has been having a positive impact on the GST revenues on a consistent basis,” the Ministry said.

E-way bills, used in inter-state transactions, also showed a pickup. During July 2022, 7.6 crore e-way bills were generated, which was marginally higher than the 7.4 crore bills in June, and 19 per cent higher than the 6.4 crore bills in July 2021, it said.

What do the improved revenues signify?

Pursuant to decisions taken in 47th GST Council meeting, GST exemption was withdrawn from “pre-packaged and labelled” retail packs, which include food items such as curd, lassi, puffed rice, wheat flour, and buttermilk, but items sold loose or unlabelled continue to remain exempt. Pre-packaged and pre-labelled food items such as grains, curd, lassi, paneer, jaggery, wheat flour, puffed rice, buttermilk and meat/ fish (except fresh and frozen) are now taxed at 5 per cent, at par with branded items.

Also, correction of inverted duty structure translated into a rate hike for household items such as LED lamps, printing/ drawing ink, power driven pumps, tetrapak to 18 per cent from 12 per cent; and for solar water heaters and finished leather to 12 per cent from 5 per cent.

Experts said that despite a sequential dip, GST revenues are strong with a pickup in economic activity and are expected to improve going ahead with the onset of the festive season.

“These collections certainly reflect the strength of the underlying economic factors as they have established a new normal of Rs1.4 lakh crore. With the onset of the festival season, which is typically a large consumption driver for all businesses, the GST collections in the coming months would also be expected to be robust,” MS Mani, Partner, Deloitte India said.

Abhishek Jain, Partner, Indirect Tax, KPMG in India, said, “The consistent high collections indicate upward economic trajectory despite fluctuating COVID cases and to some extent attributable to inflation and better compliance being ensured by the government.”

At least 16 states/ Union Territories recorded a higher than 20 per cent growth in GST collections in their regions, even though most remained below the national growth rate of 28 per cent. Experts said collections are expected to overshoot the budgetary targets set for this fiscal.

“While the absolute GST collections displayed a mild sequential dip in August 2022, the YoY growth rate remained at an impressive 28% reflecting the revival in consumption, improved compliance as well as elevated inflation. Looking ahead, the YoY growth in GST collections is likely to remain well above 20% in September 2022, before tempering down to 12-15% in Q3 FY2023, on a normalising base, trending close to the nominal GDP expansion,” ICRA’s Chief Economist Aditi Nayar said.

“We continue to foresee a considerable upside in the CGST collections relative to the FY2023 BE, more than offsetting the expected loss in excise collections,” she said.

After the end of the compensation regime for states in June 2022, the higher GST revenue growth is expected to ease the revenue concerns for some states going forward, but states with a heavy dependence on compensation may have to step up their enforcement actions to improve compliance.

Under GST, as per the Goods and Services Tax (Compensation to States) Act, 2017, the states were guaranteed compensation at the compounded rate of 14 per cent from the base year 2015-16 for losses arising due to implementation of the taxation regime for five years since its rollout. It came to an end on June 30. The GST Council meeting held in June did not take any decision to extend the compensation mechanism despite at least a dozen states making a demand for the same.

What is the detailed breakup for GST revenue?

This is the seventh time that monthly GST collections have crossed Rs 1.40 lakh crore since the inception of GST, and the sixth month in a row since March 2022. GST collections in August 2021 had stood at Rs 1,12,020 crore.

Revenues from the import of goods was 57 per cent higher, and the revenues from domestic transactions (including import of services) were 19 per cent higher than the revenues from these sources during the same month last year.

Out of the gross GST revenue of Rs 1,43,612 crore, CGST — the tax levied on intra-state supplies of goods and services by the Centre — is Rs 24,710 crore and SGST — the tax levied on intra-state supplies of goods and services by the states — is Rs 30,951 crore, the Ministry said.

IGST — tax levied on all inter-state supplies of goods and services — is Rs 77,782 crore (including Rs 42,067 crore collected on import of goods) and cess Rs 10,168 crore (including Rs 1,018 crore collected on import of goods), it said.

The Government has settled Rs 29,524 crore to CGST and Rs 25,119 crore to SGST from IGST. The total revenue of Centre and the states in August after regular settlement is Rs 54,234 crore for CGST and Rs 56,070 crore for SGST, the Ministry said.