Government eyes Rs 1.5 Lakh crore GST collections as economic activities stabilise

The government is expecting the monthly GST collections to remain around Rs 1.5 lakh crore over the next few months as the economy, particularly the service sector, gradually bounces back to normalcy after the crisis induced by Covid-19.  This comes at a time when GST collections reached Rs 1.30 lakh crore in October, the second highest since the tax was implemented in July 2017. In April 2021, the GST collection reached Rs 1.41 lakh crore, the highest ever monthly mop-up.

The trend indicates that the tax collection will be larger than April’s record, though it fell to Rs 92,900 crore in June due to the disruptions caused by the second wave of Covid-19 pandemic.

Spending has gone up and October and November collections are projected to be high, if not better than the previous months, the Times of India reported quoting a government source.  The source added that it is now time for the government to implement the next set of steps to boost revenues, implying that the existing system has reached it full capacity.

A group of ministers has already been formed to look into rate rationalisation, among other things, and officials have recommended that severe steps, such as raising rates for some of the items in the 5% band or moving the first slab up to 6-7%, are required. Besides, they claimed, there was a whole category of exempted items that is to be evaluated because there had been multiple instances of merchants misusing the exemptions, the report added.

The report quoted officials as suggesting that it was high time for the Union and state finance ministers to consider combining the 12% and 18% slabs and settling on 16-17% as the standard rate. The RBI calculated the weighted average GST rate at 11.6% a few years ago, compared to a revenue-neutral rate of 15-15.5%.

GST Picking Up Pace 

The GST collection of 1.3 Lakh crore in October was 24% higher YoY basis. The GST collection for October 2021 was 36% more than the mop-up for the same period in 2019, the pre-pandemic period.

In October, Maharashtra’s GST revenues increased by 23%, Tamil Nadu’s by 11%, Gujarat’s by 25% and Karnataka’s by 18%.

According to data given by the Finance Ministry, tax payments are being made on time, which is up from previous months.

To ensure higher compliance, the state and central tax authorities have taken steps to facilitate filing through SMS, permitting a Quarterly Return Monthly Payment (QRMP) system and auto-population of returns. The GST authorities have also taken steps to prevent e-way bills from being issued for non-filing returns, as well as system-based suspension of registration for taxpayers who have failed to file six returns in a row and credit blocking for return defaulters.