At Rs 939.6 billion, GST collection in August is fiscal's lowest

Goods and services tax (GST) collection plummeted to the lowest in the current fiscal year in August as consumers deferred purchase of over 100 items in July (post-rate reduction). The revenue mop-up stood at Rs 939.6 billion in August, a tad lower than the Rs 964.8 billion in the previous month, according to data released by the ministry of finance on Saturday. The collections are expected to slide further in September when the full impact of  the rate cut comes through. The mop up stayed well below the government’s target of Rs 1 trillion for the fourth month in succession of the current financial year. 

The government attributed the dip in collections to the probable postponement of purchase for items for which the tax rates were reduced by the GST council in its meeting on July 21. The rate cut came into effect from July 27. In a surprise move, the GST Council, chaired by the then interim finance minister Piyush Goyal, decided to cut rates on over 100 items, including refrigerators, washing machines, small-screen TV sets, perfumes and cosmetics, shavers and vacuum cleaners. This could cost the exchequer Rs 80-100 billion annually. 

“Since it would have taken some time for the market to pass on the benefit of reduced taxes, consumers would have postponed their decision to buy, waiting for the benefit. The actual impact of reduction of rate of taxes would be seen only next month onwards as the rate reduction would have take effect only in the last few days of the month,” the finance ministry said. Besides, the last date of filing return of July 2018 in Kerala was extended up to October 5, 2018, in view of the floods. According to the Union Budget as well as the expected 14 per cent growth in state GST figures, year-on-year, the monthly average was expected to be Rs 1.12 trillion in 2018-19. Finance secretary Hasmukh Adhia had recently said he expected an average monthly collection of Rs 1 trillion this year, perhaps a little less in the initial months but showing a rise in the remaining ones. 

Pratik Jain, partner & leader, indirect tax, PwC, pointed out that the full impact of the rate cut will become visible during the September collections.

“The government will hope that collections in the next few months will improve on the back of higher demand created by rate cuts and administrative tightening which has resulted in detection of several GST-related frauds recently. The number of GSTR 3B filed is still far from what the government would have wanted,” Jain said. 

Since its rollout 14 months earlier, the new indirect tax has yielded Rs 1 trillion only in April 2018. It was also counted as an aberration, since that month (start of a new financial year) saw payment of arrears from earlier months. 

The total number of goods and services tax returns (GSTR) 3B, or summarised returns filed for the month of July up to August 31 were 6.7 million. This is slightly higher than the 6.6 million returns of the month of June filed up to July 31.

Of the August collections, the central GST was nearly Rs 153.3 billion, state GST Rs 211.5 billion, integrated GST Rs 498.7 billion and cess Rs 76.28 billion.

Abhishek Jain, tax partner, EY, said while there has been a small dip in revenue collections vis-a-vis the trend in the past months, essentially on account of reduced rate of tax, with data mining and scrutiny at the government’s end, the upward trend should be in place soon.