GST Collections For August At Six-Month High
The government’s goods and services tax collection rose to the highest in six months as the nation continued to ease lockdown restrictions to revive an economy that’s headed for the first full-year contraction in four decades.
GST collections for August, collected in September, stood at Rs 95,480 crore, according to a statement from the Ministry of Finance. That was 10% higher than July and 4% more than the year-ago period.
August’s collections include the tax paid by small businesses with turnover of up to Rs 5 crore for May, June and July as the due date was extended till Sept. 15, Sept. 25 and Sept. 29, respectively. The deadlines were extended to provide relief to such businesses as the Covid-19 pandemic ravaged the economy, freezing all activities barring essentials. Tax payment deadline for businesses with turnover above Rs 5 crore, however, was not extended.
Breakup of GST collections for August
- Central GST: Rs 17,741 crore
- State GST: Rs 23,131 crore
- Integrated GST: Rs 47,484 crore
- Compensation cess: Rs 7,124 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 39,001 crore and Rs 40,128 crore, respectively.
Some major industrial states have shown positive growth in GST collections which indicates economic recovery is on track, Finance and Revenue Secretary Ajay Bhushan Pandey said in another statement.
With the festive season starting next month, “we’re much confident of better recovery in GST collection”, Pandey said.
With a significant part of the economy resuming operations, the GST collections have shown decent growth, said Abhishek Jain, a partner at EY India. The increased revenues provide an “optimistic outlook” for the economy, indicating business operations are returning to normalcy, Jain said.
Rajat Bose, partner at Shardul Amarchand Mangaldas & Co., agreed. Higher GST revenues indicate increased economic activity, he said. “It is expected that the revenue collection should continue to improve as we approach the festive season,” Bose said.
In September, more than of 5.74 crore e-way bills have been generated, showing an increase of 9.7% year-on-year, said Pandey. “These are affirmative signs of economic growth as the business activities are unlocking gradually and despite adverse impact of Covid-19, there are indicators of economic recovery,” Pandey said. About 26.19 lakh e-way bills were generated on Sept. 30, which was the highest number of e-way bills generated on a single day, he said.
Still, Rajat Mohan, partner at AMRG & Associates, feels the marginal 4% year-on-year increase in collections would not be enough for central government to compensate a 14% annual increase promised to state governments, leading to further stress in states’ finances.
Compensation cess collections have continued to drop from pre-Covid-19 levels, and has prompted states to urge the central government to compensate them at the earliest as the nationwide lockdown and a fight against the coronavirus dried up their revenue. The central government owes states around Rs 1.50 lakh crore in GST compensation in April-July.