One year of GST: Confusion over mop-up as officials differ on trends

Government does not put out reconciled tax numbers on accrual-basis, making any trend analysis difficult

The National Democratic Alliance (NDA) government celebrated one year of GST on July 1. Earlier, in April, Arun Jaitley had rejoiced when monthly gross goods and services tax (GST) collections crossed the Rs 1 trillion mark for March 2018. He called it a “landmark” and claimed that “GST collections would continue to show a positive trend” in the coming months.

But collections for April fell marginally to Rs 940 billion. 

In response to the April collections, finance secretary Hasmukh Adhia then said, “Some people are comparing the April collection figure with March which is not correct. April is traditionally the month of lowest monthly collection.”

The collections for April worried Adhia. He shot a note to the central government’s tax officials saying that the “performance of central government officers is worse than the state government barring a couple of states.” 

In a rare show of defiance, the revenue officials retorted, saying it was erroneous to compare collections for April with previous months on account of seasonality in collections and other factors. 

Now, the Controller of General Accounts shows that net collections for Central and Integrated GST collections for May are worse than that in April. 

These contradictory trends, bundled with disagreements within the government over the trend in GST collections, raise the question: How well is GST really doing? 

Is the limited data put out by the Centre sufficient to pass a judgement on the trends in GST collections, particularly that of the Centre?

The answer to the first question is difficult to come by because the answer to the second question is ‘no’. 

The government does not disclose month-wise granular data on an accrual basis – i.e. show the tax collections, net off refunds, set-offs and readjustments – against the relevant month they accrue. It shows them on a cash-basis – reflecting them in the month the collections are made or delayed refunds are adjusted. 

GST for a specific month is collected till the end of the next month. This collected amount has to be set off against refunds, adjustments and reapportionment of IGST into CGST and SGST. Reconciling all these accounting transactions for a particular month provide the real picture. But the government reflects GST collections and the adjustments as and when they take place – even when many of these adjustments occur months after the period they pertain to, such as export refunds. 

With a centralised and online database for the entire country and the GSTN at its command, the government could provide reconciled data on accrual basis. 

Business Standard asked for month-wise data for all components of GST on an accrual basis through RTI. The ministry claimed that it did not hold the information. It forwarded the application to the Central Board of Indirect Taxes and Customs. The board is yet to reply. Business Standard also emailed direct queries to the ministry. The ministry did not respond.

The intrinsic complexity and rolling nature of GST input credit and refunds, coupled with haphazard implementation in the first year, compounds the challenge of assessing the month-on-month improvement or trends in tax collections based on the information the government currently puts out. 

Settling the GST components

The GST regime has four components. central GST, state GST, integrated GST and compensation cess. While they are collected at one shot, the Union government gets to keep the central GST and is apportioned a part of the integrated GST, which is imposed on inter-state transactions. 

But, the money collected as integrated GST in 2017-18 has not been apportioned regularly. In fact, by the end of 2017-2018, Rs 1.69 trillion remained unresolved, shows the Controller General of Accounts. 

Take another example. CLSA, an investment firm’s analysis of figures released by government, shows that for the month of March 2018, Rs 505 billion was collected as IGST and Rs 284 billion was apportioned to CGST and SGST. But even from this analysed information, one cannot tell in which months the apportioned IGST actually accrued. 

The government expects the apportioning of IGST to states and the Centre to improve by the end of this fiscal. 

Refunds and input credit

Under the GST regime, businesses are able to claim several types of refunds on the GST deposited. A large part of these refunds arise from exports. But settlement of export-linked refunds has been a big problem so far. The government recently started special drives to ensure refunds pending for months to be resolved. Refunds being made in 2018-19 could also pertain to 2017-18. If accounts were available on accrual and net-off basis, the net collections for various months in 2017-18 would show a reduction for each of such refunds. 

The Controller General of Accounts’ monthly numbers on tax collection come closer to reality. But with refunds and settling of IGST taking longer than the time CGA takes to finalise accounts for a particular month, even these do not reflect the true picture. 

The difference between CGA’s net tax collection numbers and the gross early estimates put out by the finance ministry can be vastly different. Take the example of CGST collections for January 2018 in February. The CGA shows CGST collected (including apportionment from IGST) was Rs 431 billion. The finance ministry’s press release said it was Rs 255.6 billion. 

A tax expert told Business Standard that any input credit rolling over from month to month on a steady click in a stabilised GST regime could be ignored to see underlying trends. Particularly when the credit from the previous indirect tax regime tapers off. But the outstanding and undivided IGST does pose a challenge in understanding how well GST has done so far, he said. 

Even through this period of patchy implementation government statistics could have been better. All tax transactions are digitised and on a central database. But the government is not yet sharing this data with the public.