The government collected Rs 94,726 crore as goods and services tax (GST) in December, lower than the collection in the previous two months.
With a shortfall in seven of the nine months so far in 2018-19, GST collection in January, February and March has to be on average Rs 1.23 trillion to meet the budgeted target, according to calculations byBusiness Standard. While states are relatively safe due to compensation, the Centre’s fiscal position is in peril.
Against expectations of Rs 6.04 trillion from the Central GST (CGST) in 2018-19, CGST revenue stands at Rs 3.41 trillion in nine months (April-December), or 56 per cent of the annual target.
The Centre needs Rs 87,000 crore in January, February and March at least to recoup this shortfall. This includes tax collected as CGST as well as settlement towards CGST from IGST account. In comparison, the highest inflow as CGST was recorded in July 2018 stood at Rs 58,796 crore.
Admitting that the fiscal year would end with some shortfall, finance ministry officials said the amount would be near Rs 40,000 crore. Cuts in revenue and capital expenditure would be imperative, they said.
Experts said enhanced revenue from other indirect taxes and income tax would not be sufficient to make good the gap, and, as a result, anti-evasion measures would gain prominence.
“CGST collection so far suggests an impending shortfall relative to the budgeted estimate this fiscal year. A provisional settlement of the Integrated GST (IGST), as well as the residual GST compensation cess that remains after disbursal to states, will be key in augmenting the Centre’s cash flows in the coming months,” said Aditi Nayar, principal economist, ICRA.
The slowdown is surprising especially since Diwali fell in November, the month the December collection represents.
“The collections, while admittedly below the targets, seem to indicate the revenue is stabilizing at around Rs 95,000 crore a month, despite the rate reductions in the current fiscal year. A lower revenue than the target could lead to more compliance pressures on businesses and more focus on anti-evasion measures,” said M S Mani, partner, Deloitte India.
Recovering evaded GST would also be important for meeting the annual target, said Pratik Jain, partner, indirect tax, PwC India.
Tax evasion detected in April-November stands at Rs 12,767 crore, of which Rs 7,910 crore has been recovered, according to the data presented by the finance ministry in Parliament.
“We should expect greater enforcement and investigations of cases in the next few months,” said Jain.
The GST Council, in its December 22 meeting, slashed the rates of 23 items, of which six were in the top slab of 28 per cent. This would help in improving compliance, experts said.
December recorded the highest number of monthly returns (GSTR-3B) filed, at 7.24 million, 4 per cent more than 7 million filed in November.
However, this might make further rate cuts difficult, some experts said.
“The slight dip in GST revenue collections as compared to the last two months is a bit discouraging. This may deter the government from rationalising the rate of goods left in the 28 per cent category like cement and auto parts in the short term,” said Abhishek Jain, tax partner, EY India