The gross goods and services tax (GST) collections shot up by 12% on year to Rs 1,15,174 crore in December, the highest month-to-month mop-up due to the fact the tax’s July 2017 launch, reflecting Diwali consumption demand, fruits of a stepped-up drive against big-scale evasion, and a sustained momentum towards financial recovery.
The December income, which comes from transactions carried out 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 mentioned in a statement.
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 financial recovery, rather than the release of pent-up demand through the festive period, will be clear only with the advantage of information on collections to be reported in the coming handful of months. Other higher-frequency financial indicators as well broadly recommend a sustained recovery more than the 3-4 months by way of November, but do not rather let the month to stand apart, as a sharp-recovery period, as the GST figures do.
Having recorded the lowest contraction in seven months (.1%) in September, the output of eight core industries, which have an virtually 40% share in the index of industrial production, once more slid by .9% in October and a sharper 2.6% in November, thanks mostly to a drop in cement and steel.
Similarly, immediately after scaling its peak in more than a decade in October, manufacturing activity, as measured by the Purchasing Managers Index (PMI), hit a 3-month low in November. Of course, at 56.3, it nevertheless remained sturdy and Diwali holidays may well have contributed to the decline. Nevertheless, the fluctuations in order flow could discourage producers to generate more and employ more.
Diesel sales picked up in a sustained manner in April-November and rail freight rose sequentially in the 5 months by way of December, but electrical energy demand was down in November.
The highest month-to-month 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, companion and leader of indirect tax at PwC India, mentioned: “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.”