At Rs 1.15 lakh crore, GST mop-up hits record high in December 2020

At Rs 1.15 lakh crore, GST mop-up hits record high in December 2020

GST in indiaThe December revenue, which comes from transactions done in November, was also up 9.7%, month on month.

The gross goods and services tax (GST) collections shot up by 12% on year to Rs 1,15,174 crore in December, the highest monthly mop-up since the tax’s July 2017 launch, reflecting Diwali consumption demand, fruits of a stepped-up drive against large-scale evasion, and a sustained momentum towards economic recovery.

The December revenue, which comes from transactions done in November, was also up 9.7%, month on month. “During the month (December), revenue from import of goods was 27% higher and the revenue from domestic transactions (including import of services) was 8% higher than the revenues from these sources during the same month last year,” the government said in a statement.

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It added: “This has been due to a combined effect of the rapid economic recovery post-pandemic, and the nation-wide drive against GST evaders and fake bills along with many systemic changes introduced recently, which have led to improved compliance”.

What extent of the rise in GST receipts could be ascribed to economic recovery, rather than the release of pent-up demand during the festive period, will be clear only with the benefit of data on collections to be reported in the coming few months. Other high-frequency economic indicators too broadly suggest a sustained recovery over the three-four months through November, but don’t quite allow the month to stand apart, as a sharp-recovery period, as the GST figures do.

Having recorded the lowest contraction in seven months (0.1%) in September, the output of eight core industries, which have an almost 40% share in the index of industrial production, again slid by 0.9% in October and a sharper 2.6% in November, thanks primarily to a drop in cement and steel.

Similarly, after scaling its peak in more than a decade in October, manufacturing activity, as measured by the Purchasing Managers Index (PMI), hit a three-month low in November. Of course, at 56.3, it still remained strong and Diwali holidays may have contributed to the decline. Nevertheless, the fluctuations in order flow could discourage manufacturers to produce more and hire more.

Diesel sales picked up in a sustained manner in April-November and rail freight rose sequentially in the five months through December, but electricity demand was down in November.

The highest monthly GST collection previously was Rs 1,13,866 crore reported in April 2019. “The revenues of April normally tend to be high since they pertain to the returns of March, which marks the end of financial year,” the government noted.

It added: “Till now, GST revenues have crossed Rs 1.1 lakh crore three times since introduction of GST… The average growth in GST revenues during the last quarter (Q3) has been 7.3% compared with (-) 8.2% during the second quarter and (-) 41.0% during the first quarter of the financial year.”

“The government has settled Rs 23,276 crore to CGST and Rs 17,681 crore to SGST from IGST as regular settlement. The total revenue earned by Central Government and the state governments after regular settlement in the month of December 2020 is Rs 44,641 crore for CGST and Rs 45,485 crore for the SGST”.

Pratik Jain, partner and leader of indirect tax at PwC India, said: “Significant jump in GST on imports could indicate revival in demand on 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 FY17-18 and FY18-19 are yet to start in a big way.”

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