GST Collections For July Remain Steady At Rs 86,449 Crore

The government’s goods and services tax collection remained steady as the economy gradually opened up after the nation eased lockdown curbs.

GST collections for July, collected in August, stood at Rs 86,449 crore, according to a statement by the Ministry of Finance. That was 1% lower than June and 12% than the year-ago period.

July’s collections include the tax paid by small businesses with turnover up to Rs 5 crore for March and April as the due date was extended to July 3 and July 6, respectively. Such small taxpayers can pay GST for May-July by Sept. 29. The deadlines were extended to provide relief to small businesses as the Covid-19 pandemic ravaged the economy, and subsequent lockdowns to contain it froze economic activities.

The collections include tax paid by large taxpayers with an annual turnover of more than Rs 5 crore.

While collections have fallen over the previous year, Abhishek Jain, partner at EY India, said a significant part of the dip is attributable to imports as Covid-19 impacted international trade. But revenue from domestic transactions achieved 92% of July 2019 collections, a sign of recovery after easing the lockdown, Jain said.

Breakup of GST collections for July

• Central GST: Rs 15,906 crore
• State GST: Rs 21,064 crore
• Integrated GST: Rs 42,264 crore
• Compensation cess: Rs 7,215 crore

Integrated GST is settled between states and the central government based on consumption in respective states. After the settlement, central and state GST stood at Rs 34,122 crore and Rs 35,714 crore, respectively.

Rajat Bose, a partner at Shardul Amarchand Mangaldas & Co., said the collections are stabilising, and expects GST revenue to be in this range for the next six months at least.

Rajat Mohan, partner at AMRG & Associates, a tax consultancy firm, agreed. Although the economy is on the path to recovery, GST collections would continue to remain at this range as consumption has been impacted due to several reasons such pay cuts and job losses, he told BloombergQuint.

According to Aditi Nayar, vice-president at ICRA Ltd., however, a temporary uptick in sales due to pent-up demand may boost GST collections in the initial unlock period, but may not sustain subsequently. “Consumption of discretionary services, such as tourism and hospitality, may revive meaningfully only after a Covid-19 vaccine becomes widely available,” she said in a note on Monday.

Compensation cess collections have continued to drop from pre-Covid-19 levels, prompting states to urge the central government to compensate them at the earliest as the nationwide lockdown and a fight against the coronavirus has dried up their revenue.

The central government owes states around Rs 1.50 lakh crore in GST compensation in April-July. It has given them two options to borrow to meet the shortfall for the entire financial year. But eight states have declined the options and sought Prime Minister Narendra Modi's intervention.

Only six states reported growth in their collections compared to last year, according to the statement. These states were Jammu and Kashmir, Nagaland, Uttar Pradesh, Chhattisgarh, Uttarakhand and Rajasthan.