The government mopped up its highest ever monthly Goods and Services Tax collection last month due to seasonal strength in March industrial activity and not because of the quarterly payments from the composition scheme.
That’s the word from financial major Credit Suisse. GST collection in the month of April crossed the Rs 1 lakh crore mark for the first time since the new tax regime was rolled out on July 1 last year, the finance ministry said in a statement. That can be attributed to the the seasonal strength in industrial output in March, Neelkanth Mishra and Prateek Singh of Credit Suisse said in a report.
March industrial production is typically 12 percent higher than the July-February average. If industrial activity for the rest of the year rose at the same pace as March, adjusted average monthly GST revenue would have been about Rs 92,200 crore instead of the current average of Rs 89,900 crore, they added.
This rise does not reflect a pickup in tax buoyancy, according to Japanese brokerage Nomura. “If the year-end spike in seasonality is taken into account, the numbers do not appear blockbuster,” it said in a research note.
Historically the government’s indirect tax collections have always nearly doubled in March, Nomura said. And when compared to the monthly average, collections in April have risen only about 15 percent, it added.
Because the rise in April GST collection is largely on account of seasonal factors, we do not believe the April GST data are sufficient (in themselves) to build confidence in the FY19 budgeted GST targets.Nomura
The brokerage said it will be confident about the government’s GST revenue target only if the monthly collections sustain above the Rs 1 lakh crore mark.
Credit Suisse also noted that unallocated integrated GST has continued to build up, with the quantum of IGST transferred to states higher than the Centre.
“This suggests all unallocated IGST is not just unused credit,” the note said. “The mix of Rs 7.4 lakh crore in FY19 in GST revenues at the Centre may be more IGST and less CGST than currently budgeted,” Credit Suisse added.
But tax compliance is getting better every month. Till the April 20 due date, up to 55 lakh had filed their returns. The increase in compliance should boost tax collections further, the note said.