Festivals, action on evaders: GST revenue hits record high growth

Goods and Services Tax (GST) collections in December (for sales in November) rose 11.6 per cent to Rs 1,15,174 crore, the highest year-on-year growth since the indirect tax regime came into force in July 2017. Higher festive season sales on account of Diwali in November, along with the rollout of new technological systems of e-invoicing, and action against tax evaders contributed to the surge in GST revenues.

The Finance Ministry said this has been the highest growth in monthly revenues in the last 21 months. “This has been due to the combined effect of the rapid economic recovery post pandemic and the nationwide drive against GST evaders and fake bills along with many systemic changes introduced recently, which have led to improved compliance”, the Ministry said.

Tax experts, however, noted that for a clearer picture of the extent of the economic recovery, the government should provide a breakup of GST revenues collected through filing of returns, and through recovery drives by the authorities.

“The GST collections in December have been higher than expected. The collections are significantly higher as compared to the same month last year. However, the government should also provide a breakup of the GST collected through filing of returns and GST collected through recovery drives initiated by the DRI and DGGSTI authorities, which should give us a true picture of the extent of economic recovery,” Rajat Bose, Partner, Shardul Amarchand Mangaldas & Co, said.

December was the fourth month in which GST revenue collections posted a year-on-year growth. The proposed extension of electronic invoicing to more businesses is expected to further prevent leakage in GST revenues.

“Recent changes introduced and effectively implemented in the GSTN technology platform like e-invoicing and of the matching of supplier invoices along with strict enforcement by revenue authorities in checking fraudulent invoices, has induced enhanced degree of reporting compliance…as e-invoicing gets extended to less than Rs 100 crore turnover taxpayers in the near future, it shall further prevent leakage of GST in the MSME sector,” Atul Gupta, Senior Director, Deloitte India, said.

“However”, Gupta said, “the government should ensure easing bank credit availability to the MSME sector which is still struggling to recover from the Covid-induced slowdown in the domestic and export markets.”

Under GST laws, e-invoice for B2B (business to business) transactions have been made mandatory for companies with turnover of over Rs 500 crore from October 1 last year. It was notified to be extended to businesses with over Rs 100 crore turnover from January 1 this year, and is likely to be extended to all businesses beginning April 1. The e-invoicing system is connected to a central portal, which receives and validates invoices in real time.

GST collections, which are an indicator of economic activity, had plummeted to a record low of Rs 32,172 crore in April, following the Covid-19 pandemic lockdown. The average growth in GST revenues during the October-December quarter has been 7.3 per cent as compared to (-)8.2 per cent during the July-September quarter and (-)41 per cent during the April-June quarter of the financial year.

Out of Rs 1,15,174 crore GST revenues in December, Rs 21,365 crore is Central GST; Rs 27,804 crore is State GST; Rs 57,426 crore is Integrated GST (including Rs 22,050 crore collected on import of goods); and Rs 8,579 crore is Cess, including Rs 971 crore on import of goods, the statement issued by the government said.

A total of 87 lakh GSTR-3B returns were filed for the month of November up to December 31, as against the 82 lakh filed in the previous month.

The government settled Rs 23,276 crore to CGST and Rs 17,681 crore to SGST from IGST as regular settlement. After this, the total revenue earned by the Centre is Rs 44,641 crore as CGST, and by the states is Rs 45,485 crore as SGST, the Ministry said.

In December, revenues from the import of goods were 27 per cent higher, and revenues from domestic transactions (including import of services) were 8 per cent higher than the same period last year, the Ministry said.

Tax experts said the increase in GST on imports possibly reflects a revival in demand for some products. “Significant jump in GST on imports could indicate revival in demand for high-end products like cell phones and electronic items. Apart from economic revival, the reason for this growth could be tightening of compliances with measures such as e-invoicing and increased investigations to catch tax evaders, even though GST audits for ’17-’18 and ’18-’19 are yet to start in a big way,” Pratik Jain, Partner & Leader, Indirect Tax, PwC India, said.