GST collection recovers to a 3-month high of Rs 1.16 trn in July

The Goods and services tax (GST) collection recovered to a three-month high in July, exceeding the Rs 1.1 trillion mark, as economic activity resumed with most states easing Covid-19 restrictions, official data showed on Sunday. The better-than-expected collection would provide a cushion to the government to ramp up spending for reviving economic growth.

The GST mop-up in July stood at Rs 1,16,393 crore, as against Rs 92,849 crore in June, according to the data released by the finance ministry. Collections had fallen below the Rs 1 trillion mark for the first time in eight months in June, with large parts of the country facing localised lockdowns to contain the spread of pandemic.

However, the collection figure for July also includes Rs 4,937 crore already accounted for in the figures released in June. It pertains to the returns filed between July 1 and July 5, as taxpayers were given various relief measures such as waiver/reduction in interest on delayed return filing for 15 days for the return filing month June21 for the taxpayers with the aggregate turnover up to Rs 5 crore in the wake of the second Covid-19 wave.

GST collections in July posted a 33 per cent growth compared to the corresponding period last year. The latest numbers pertain to transactions done in June. In April this year, the collection was at a record high of Rs 1.41 trillion.

The July collection was on expected lines as daily e-way bill generation, which indicates supply in the economy, recovered to an average of 1.8 million a day in June compared to 1.2 million in May.

“…With the easing out of Covid restrictions, GST collection for July 2021 has again crossed Rs 1 trillion which clearly indicates that the economy is recovering at a fast pace. The robust GST revenues are likely to continue in the coming months too,” said the ministry of finance in a press statement.

During the month, revenues from import of goods were 36 per cent higher and those from domestic transactions (including import of services) are 32 per cent higher than the revenues from these sources during the same month last year.

Aditi Nayar, chief economist, Icra Ratings said that while the GST collections in July have displayed a heartening sequential increase… their level remains well below the all-time high recorded in April 2021. “In our view, this is further evidence that the graduated unlocking in June 2021 has triggered an incomplete recovery, which is expected to strengthen in July 2021, further boosting the August 2021 GST collections. The pace of growth across the states was highly uneven in July 2021, with some industrial heavyweights recording a sharp expansion,” Nayar added.

Among large industrial states, Maharashtra posted 51 per cent growth in collections and Tamil Nadu 36 per cent in July year-on-year. Resource-rich Jharkhand and Odisha posted 54 per cent growth each.

M S Mani, senior director, Deloitte India, said the sharp increase in the collections for June 21 indicates the resumption of economic activities in June and will raise expectations of better collections in the coming months. ”The improvement in GST collections both on domestic transactions and imports, accompanied by the fact that major producing states have shown significant increases, would indicate that the economic activities have resumed across the country” said Mani.

Key segments of GST collection yielded more in July compared to June. For instance, central GST collection stood at Rs 22,197 crore as against Rs 16,424 crore in June. State GST mop-up was Rs 28,541 crore as against Rs 20,397 crore in the previous month. However, compensation cess was at Rs 7,790 crore compared to Rs 6,949 crore in June.

During June, the government settled Rs 28,087 crore to CGST and Rs 24,100 crore to SGST from IGST as regular settlement. It also did a regular integrated GST settlement of Rs 50,284 crore to CGST and Rs 52,641 crore to SGST.

The government has also been managing robust GST collections due to tightened enforcement through closer monitoring against fake-billing, deep data analytics using data from multiple sources including GST, income-tax and customs IT systems and effective tax administration. Easier compliance also encouraged return filing.