Revenues from Goods and Services Tax (GST) seem to have beaten the pandemic blues. Even as monthly GST collection has remained above the crucial Rs 1-lakh-crore mark since October last year — with a slight blip in June this year as the collection dipped to ₹92,849 crore in the aftermath of Covid 2.0 — there is more than meets the eye on the key indirect tax revenue front.
A closer look at the monthly GST revenue figures reveal that collections in the pandemic year have surpassed those of 2019-20 as well as the high growth period of 2018-19.
The total gross GST revenue earned by the government in the first half of the current fiscal is ₹6,82,365 crore, a 12.5% increase from ₹6,06,294 crore in the pre-pandemic period of H1 FY20. In every month barring June, the monthly collection in the first half of the current financial year is higher than the monthly mop-up during April-September 2019-20.
Even if one may argue that FY20 was a slowdown year and the economy started showing signs of weakness in the first and the second quarter, the size of the economy in Q1 FY20 was bigger than the size of the economy in the April–June period of the current fiscal. According to data from the National Statistical Office, GDP at constant prices (2011-12) in Q1 FY22 stood at ₹32.38 lakh crore, down 9.17% from ₹35.35 lakh crore in Q1 FY20.
Even in the high growth, pre-pandemic and pre-slowdown year of 2018-19, GST revenue in the first half of the fiscal at ₹5,77,969 crore was about 18% less than the collection in the first half of the current financial year.
It is not only the economic revival that has led to the rise in GST revenue collection. Experts point towards enhanced compliance, automation and technological intervention as contributing factors. They expect the revenue collection to go up further in the coming months on the back of festive demand.
“Factors that have led to the buoyancy in GST collection include a robust compliance system, correction of the inverted duty structure with increase in output prices and an enhanced focus on automation. Going forward, during the festive season between November and January, the collection is expected to remain elevated,” Ritesh Kanodia, partner, Dhruva Advisors LLP, told Fortune India.
Agrees Rajat Bose, partner, Shardul Amarchand Mangaldas & Co. “The government has tightened the noose around GST fraud cases. With more intervention from tech and artificial intelligence, and data-matching with outside entities, tax evasion has been brought under control to a large extent,” he says.
Bose also expects monthly GST revenue to surpass the all-time high of ₹1.41 lakh crore recorded in April. “There will be buoyancy. The festive demand will come up beginning this month and will sustain till November. After that tourism is also expected to pick up. A lot of pent-up demand will also come up in the coming months. Monthly collection may touch ₹1.5 lakh crore if there is no more lockdown and disruptions,” he adds.
Kanodia expects more buoyancy with the recent government focus on rate rationalisation and merger of rates. However, such moves may take time since the group of ministers (GoM) has recently been set up on the issue. "Effective tax rate under GST has come down from the revenue neutral rate of 15.5% to around 11.6% currently, which the government will try to correct. There is a strong possibility of the 5% slab getting merged with the 12% slab going forward," he adds. In its recent meeting held on September 17, the GST Council set up a GoM under the chairmanship of Karnataka chief minister B.S. Bommai to review exemptions to goods and services and suggest measures for expansion of the tax base.
Trends in e-way bills, too, corroborate the expectation of further buoyancy in the coming months. According to data from the GST Network — the information technology backbone of GST — 6.79 crore e-way bills were issued in September, against 6.58 crore in August and 6.41 crore in July. E-way bill is essentially a tracking system for supplies as a registered supplier cannot transport goods over ₹50,000 without generating an e-way bill. Higher September e-way bill data over August means October GST numbers will be higher than September as the revenue for the month pertains to transactions of the previous month.
The recent monthly revenue figures for September show a 23% year-on-year increase at ₹1,17,020 crore — the second-best collection in the first half of the current fiscal, after the record high of ₹1,41,384 crore in April.
The anti-evasion drive had slowed down in the wake of the second wave of the pandemic, but is likely to pick up soon, an official in the Central Board of Indirect Tax and Customs said on condition of anonymity. “We will continue to nab evaders who are gaming the input tax credit mechanism through fake invoices and resorting to other means of tax evasion.” The other means of GST evasion include misclassification undervaluation and clandestine movement of goods. Around 8,000 cases of fake input tax credit of over ₹35,000 crore was unearthed during 2020-21 — almost 3% of the gross GST collection of ₹11,36,775 crore. Almost 426 people, including tax and legal professionals, were arrested in various cases. Over 500 cases of GST evasion have been detected till date in the current fiscal.