GST Collections For May Fall Below Rs 1 Lakh Crore
The government’s goods and services tax collection fell below Rs 1 lakh crore for the first time in eight months as the second wave of Covid-19 infections stalled the nascent economic activity.
GST revenue for May, collected in June, stood at Rs 92,849 crore, according to a statement from the Ministry of Finance. That’s almost 10% below the Rs 1.03 lakh crore collected in April, but 2% higher than the year-ago period.
Monthly collections had stayed above Rs 1 lakh crore since October last year till April 2021.
Breakup of GST collection:
Central GST: Rs 16,424 crore
State GST: Rs 20,397 crore
Integrated GST: Rs 49,079 crore (including Rs 25,762 crore collected on import of goods)
Cess: Rs 6,949 crore
“While the collections are lower than Rs 1 lakh crore, which had become the norm for the past few months, considering the fact that it relates to transactions in May 2021 that was badly impacted by the pandemic, it would be considered as a very satisfactory collection,” MS Mani, senior director at Deloitte India, said. “These numbers also reflect the economic resilience shown during the recent pandemic phase.”
Abhishek Jain, tax partner at EY India, too, said the “dip is on the expected lines” as the collections were for the supplies made in the month of May, when several parts of the country were under the lockdown. “With significant relaxations in lockdown and business supplies picking up, the collections should see a definite uptick in the coming months,” he said in an emailed statement.
According to the ministry, with the reduction in caseload and easing of lockdowns, e-way bills generated during June 2021 were at 5.5 crore. That, it said, indicates a recovery of trade and business.
The average generation of e-way bills has been increasing and has reached 20 lakh again since June 20. It is expected that while GST revenues have dipped, it will see an increase again from July 2021 onwards, the ministry’s statement said.
Cess collections for May fell 9.34% over the year earlier.
”The reduction in GST collection also means a reduction in collection of cess. This is likely to have a ripple effect and the states are again likely to receive a haircut as far as revenue share is concerned,” Rajat Bose, partner at Shardul Amarchand Mangaldas & Co., said.
The government has projected the compensation required for the current year at Rs 2.7 lakh crore, assuming nominal GDP growth of 7% for 2021-22. Of this, about Rs 1-1.1 lakh crore will likely be collected through the cess imposed, according to the proposal. The remaining Rs 1.58 lakh crore will be funded through borrowings by states via the federal government.
A decision on this is yet to be taken.
This is the second straight year when the government has faced a shortfall in compensation cess collections. And like last year, the central government will borrow from the markets and then pass on funds to states as loans. These borrowings will be repaid from compensation cess collections over the coming years.