According to data issued by the Finance Ministry, GROSS GOODS and SERVICES TAX (GST) revenues surged 55.8% year over year to Rs 1,44,616 crore for June (for sales in May), the second highest level since the indirect tax system was introduced in July 2017. The effects of inflation, the economic recovery, and anti-evasion initiatives, particularly those taken against false billers, have all contributed to the increase in GST.
Prior to this, GST receipts reached a record high of Rs 1.68 lakh crore in April for year-end sales that occurred in March. Since the implementation of the GST, monthly collections have now exceeded Rs 1.40 lakh crore five times. Since March 2022, this has happened four times in a row. The total amount of GST collected in June 2021 was Rs 92,800 crore.
Nirmala Sitharaman, Union Finance Minister, stated that within five years of its implementation, GST was shown its potential. She was speaking at the GST Day festivities on Friday. “The total gross GST revenue collected in June was Rs 1,44,616 crore, up 56% from the corresponding month last year. Therefore, we are now reversing the trend that was being discussed and demonstrating that GST collections remain above Rs 1.40 lakh crore. The approximate bottom line is Rs. 1.40 lakh crore, and we won’t go below that. We’ll continue to be above that, she declared.
She added that tax arbitrage between states that existed prior to the implementation of the GST has been eliminated, and that the Central Board of Indirect Taxes and Customs (CBIC) is open to ideas from business. “GST has largely abolished discretion; there is no way for rent seeking.” However, I still believe that we should be doing a better job of eliminating even a tiny bit of discretion. If it exists, we should simply ensure that the system is so transparent that all hints of possible discretion should be fully eliminated, the woman stated.
Some states’ revenue worries should be alleviated moving forward by the increased GST revenue growth, while those that heavily rely on compensation may find FY23 to be a difficult year, according to analysts.
According to the GST (Compensation to States) Act of 2017, the states were assured compensation for losses resulting from the implementation of the system for five years following its rollout at a compounded rate of 14 percent, using 2015–16 as the base year. On June 30, this came to an end. Despite requests from at least a dozen states, the GST Council meeting earlier this week did not decide to prolong the compensation system.
Since the introduction of the GST, the compensatory cess was also collected at its highest rate ever in June, totaling Rs 11,018 crore. The collection in June 2022 is not only the second biggest, but it also bucked the historical tendency of June being a month with low collection. Anti-evasion efforts, particularly those taken against false billers, have helped to increase GST along with economic recovery. Since the implementation of the GST, this month’s gross cess collection is the highest, according to a statement from the Finance Ministry.
In comparison to 7.4 crore in April, 7.3 crore e-way bills were created in May.
Compared to the average monthly collection of Rs. 1.10 lakh crore during the same period last fiscal year, the average monthly gross GST collection for the first quarter of 2022–23 was Rs. 1.51 lakh crore. When compared to the same month last year, the revenue from domestic transactions (which includes the import of services) was up 56% and the revenue from imported commodities was up 55%.
With the exception of Daman & Diu and the Centre jurisdiction, all other states and union territories had double-digit rise in the amount of GST generated, with Tamil Nadu, Maharashtra, Haryana, and Uttarakhand leading the way.
According to experts, efforts to combat tax evasion, such as audits and analytics projects, would assist increase GST collections above and beyond planned levels.
This suggests that the Government of India will benefit materially from an increase of around Rs 1.2 trillion compared to its FY2023 Budget Estimates for CGST (Central GST) of Rs 6.6 trillion. The economic recovery has contributed to the headline GST revenues’ fast YoY growth of 56% in June 2022, which has also been aided by the second wave of COVID-19’s low base and the translation of high commodity prices into output inflation. Many states could be able to survive the end of the GST compensation period if GST receipts increase at the anticipated rate of roughly 17% in FY2023. However, those states that rely more heavily than others on GST compensation as a source of revenue may find FY2023 to be particularly difficult, according to Aditi Nayar, chief economist at ICRA.
“These consistently high revenues reflect recovery from the pandemic hit,” said Abhishek Jain, Partner Indirect Tax at KPMG in India. “They can also be ascribed to inflation and the strict checks and balances put in place by the government.” The collections should provide some financial relief to the federal government and the states.