GST COLLECTIONS MAY NOT INDICATE ECONOMIC REVIVAL ?

[Dr. Sanjiv Agarwal]

In first nine months of Financial Year 2017-18 when GST was in force w.e.f. 1^st July, 2017, GST collections have averaged @ ₹ 89800 crore per month. Effectively it is for eight months as GST is collected in the following month. The GST collection in 2017-18 (9 months) has averaged @ ₹ 89800 crore per month which is on a lower side (provisional but including cess totaling ₹ 7.41 lakh crore).

For the first time, GST collection has crossed ₹ 1 lakh crore mark in April 2018. However, this collection pertains to economic activities generated and performed in  March, 2018 or earlier based on tax invoices issued during the relevant period. GST collections in April, 2018 amount to ₹ 103458 crore, the breakup of which is follows:

GST Revenue Collection

Tax	(Rs. in crore)
CGST	18652
SGST	25704
IGST	50548
Compensation Cess	8554
Total	103458

According to Ministry of Finance Press Release dated 27.04.2018, the total gross GST revenue collected in the month of April 2018 is ₹ 1,03,458 crore of which CGST is Rs,18652 crore, SGST is ₹ 25,704 crore, IGST is ₹ 50,548 crore (including 21,246 crore collected on imports) and Cess is ₹ 8554 crore (including ₹ 702 crore collected on imports). The total revenue earned by Central Government and the State Governments after settlement in the month of April, 2018 is ₹ 32,493 crore for CGST and ₹ 40,257 crore for the SGST.The buoyancy in the tax revenue of GST reflects the upswing in the economy and better compliance.

However, it is usually noticed that in the last month of a financial year, people also try to pay arrears of some of the previous months also and, therefore, this month's revenue cannot be taken either as trend for the future or a signal of economic recovery. It is just a reflection of hectic economic activities in the last month of the financial year.

The data indicates that there are more economic activities in inter-state than intra-state as IGST collected is 48% of total tax where as aggregate of CGST and SGST is 43% only. In case of inter-state transactions, only IGST is charged @ GST rate which is sum of rate for CGST and SGST whereas in intra-state transactions, 50% of IGST rate is charged each as CGST and SGST.

People in Government and economists look at it in their own way attributing this so called achievement to better compliances and economic revival. If one looks at tax collections in pre-GST regime, this is not an achievement. Two major central taxes (Central Excise Duty and Service Tax) alone amounted to about ₹ 7 lakh crore. If we add other taxes including value added tax of all states it would lead to the conclusion that there a nothing worth celebrating. Further, this collection is for March, 2018 which has been collected in April, 2018. March is considered to be a month of hectic economic activities, it being the last month of the financial year and increased tendency of sales and profit booking. In other words, March is not a median month to be compared to other months. Yes, tax compliances have certainly  increased under GST regime which may be one of the factors for enhanced tax collections.

One needs to wait, watch and see if this could be sustained over a period. It also need to grow atleast at a pace at which economy is growing. GST Council has set a target of ₹ 12 trillion for GST collection for 2018-19, buoyed by higher tax compliance in first year of GST regime. However, Government should look at the revenue collection over a period, say, atleast on a quarterly basis. From 2018-19 fiscal, the government is shifting to a cash basis of accounting where revenues accrued at the completion of a month would be taken on record immediately at the end of the month.

A ray of hope can be seen in the e-way bill system which may lead to better tax compliances and act as a deterrent for tax evasion and tax avoidance. Tax collections may also rise when TDS / TCS provisions are brought into action in near future.