GST collections down marginally to Rs86,318 cr in January, hopes of better compliance fade

Revenue collections from the goods and services tax (GST) fell marginally to Rs86,318 crore in January from Rs86,703 crore in the previous month, belying the government's expectations that a reduction in rates and an expansion of the base will keep tax collections intact, and could even increase it.

And, despite a shrinking of transitional credit claims and an expansion of the base, GST collections in January have failed to push up revenue collections.

According to a government statement, 69-per cent of eligible taxpayers - nearly 5.8 million - filed returns for January by 25 February, slightly higher than in the previous month.

The goods and services tax (GST) collections for January fell marginally to Rs 86,318 crore from Rs 86,703 crore in the previous month, belying the government's expectations that a shrinking of transitional credit claims and an expansion of the base might have taken the revenue to a higher orbit.

The fall in GST collections in January could also dent the possibility of a further reduction in tax rates at the GST Council's 10 March meeting as there is nothing to suggest that lower rates will boost compliance and thereby help revenue collections to grow at an incremental rate.

As chances of raising rates again are remote the government may think in lines of enforcing compliance to boost revenue growth, say analysts.

The government could think on the lines of introducing anti-evasion measures such as invoice-matching and reverse charge on transactions with unregistered dealers, besides the e-way bill, which is slated to be rolled out from April.

The stagnation in collections might also lead to tighter scrutiny of residual transitional credits and a slower pace in refunding the tax to exporters, even though they are expecting a pick-up in refunds towards the end of the financial year.

About 10 million businesses are registered for GST, while only 8.7 million out of these are required to file monthly returns.

Total tax collection under central GST and state GST for January stood at Rs25,560 crore and Rs33,440 crore, respectively.

These figures include transfers of funds from integrated GST to both CGST and SGST by way of settlements. This reflects that the CGST revenue, constrained so far owing to the huge transitional credit claims (about Rs 1.6 lakh crore), is yet to gather pace.

Budget estimates put monthly CGST revenue during the current fiscal to be Rs27,675 crore. With an additional over Rs20,238 crore expected to reach the central exchequer as share of the accumulated IGST, the budget estimates the centre's total share of GST (gross, before mandatory transfers to states) to be around Rs47,913 crore.

The budget projects the centre's average monthly GST proceeds for 2018-19 to be Rs54,491 crore, a growth of 14 per cent.

However, if the current trend prevails, there could be a shortfall in overall GST collections. And since the states are to be compensated for any revenue shortfall from the revenue level a 14 per cent annual growth from the 2015-16 base would entail, subdued CGST posing  a serious threat to centre's revenue.