GST collection falls in July, augurs poorly for economy revival

At Rs 87,422 crore, GST collection in July was even less than what it was in June

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The latest GST collection figures have proved a dampener to talks of green shoots and a V-shaped curve for economic revival, as collections dipped in July with GST revenue at just Rs 87,422 crore.

This is 86 per cent that of the GST collected last year in the same month, which was at 1.02 lakh crore rupees—that is, collections have dropped by 14 per cent. Equally, if not more, concerning is the fact that the receipts are less even compared to June, the first month of Unlock. In June, the collection was fairly better at Rs 90,917 crore.

However, government officials were quick to dismiss talks of a protracted deceleration with the economy not picking up quickly enough, pointing out how June month’s GST receipts were better because of pending tax payments.

“It is important to note that during the previous month, a large number of taxpayers also paid taxes pertaining to February, March and April 2020 on account of the relief provided due to COVID-19. It may also be noted that the taxpayers with turnover less than Rs 5 crore continue to enjoy relaxation in the filing of returns till September 2020,” pointed out a Finance Ministry note.

Central GST is Rs 16,147 crore while state GST share came to Rs 21,418 crore. IGST, including import duties and cess, came to Rs 42,592 crore. The total revenue earned by the after regular settlement in the month is 39,467 crore for CGST and 40,256 for SGST.

Post-lockdown, GST collections plummeted to just above 32,000 crores in April and 62,000 crores in May. June, the first full month of economic activity after the ‘Unlock’ process was set in motion, offered a ray of hope when GST revenue rose to nearly 91,000 crore—however, July seems like those hopes were premature.

After dropping below the magical one lakh crore mark for a few months during 2018 and 2019 due to the economic slowdown, collections had been climbing in the months before COVID-19 hit. Right through November and till the lockdown in March, the government had managed to collect more than one lakh crore rupees in GST receipts per month. In January 2020, collections reached Rs 1.11 lakh crore.

Another mounting headache for the centre will be the big drop in collections from the big, industrialised states which contribute more to the nation’s GDP but that have been battered by the pandemic. Maharashtra and Tamil Nadu, which have witnessed some of the biggest spurts in infections, have seen their GST collections fall month-on-month by 24 per cent and 17 per cent respectively.

The news is bad for the Delhi-Gurugram-Faridabad industrial/commercial belt as well—while Delhi fell by 23 per cent, Haryana’s drop was at 25 per cent.

Interestingly, Rajasthan is the only state to show growth in GST revenue, with GST collection going up from Rs 2,699 crore to 2,797, a growth of 4 per cent. Both Madhya Pradesh and Andhra Pradesh registered status quo compared to last year, while all other states and union territories registered a decline in the tax collection.

As per the GST law, the centre is supposed to compensate states when GST revenue growth falls below 14 per cent. With the centre’s coffers already bleeding, this will become a vexing issue that could spark off another round of centre-state turmoil.

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