GST collection hits ₹1.62 trillion in September

Central and state governments collected ₹1.62 trillion in goods and services tax (GST) in September, marking the fourth highest monthly collection since the inception of the indirect tax regime and a 10% annual growth from the year-ago period.

Overall, GST receipts so far this year are in line with the 10.5% nominal GDP growth rate projected by the finance ministry and reflect the trends in tax administration efficiency as well as consumption.

After the settlement of taxes on inter-state sales, the central government received ₹63,555 crore while states received ₹65,235 crore in September, the Union finance ministry said on Sunday. Proceeds from the GST cess levied on items like high-end automobiles stood at a robust ₹11,613 crore.

The ministry said that GST revenue receipts are in line with official estimates. Gross receipts from GST in the first half of the current fiscal improved 11% from the year-ago period to ₹9.92 trillion. The average monthly gross collection this fiscal is ₹1.65 trillion, which is 11% more than in the year-ago period.

Experts pointed out that GST collection growth has been aided to a considerable degree by improved administrative efficiency as well as a structural shift: micro enterprises taking GST registration, broadening the tax base and increasing the formalization of the economy. While streamlining the indirect tax system has helped in stabilizing revenue collections, its potential is constrained by the vulnerability in India’s consumption revival after the pandemic in the face of high inflation. Experts believe that rural consumption, which was subdued earlier and had begun to make a comeback at the beginning of this fiscal as many enterprises resumed operations, has since remained flat.

Abheek Barua, chief economist at HDFC Bank Ltd, said there is a risk associated with food price inflation. If it sustains, consumption may take a hit. According to him, there is one factor that is helping boost incomes and giving impetus to consumption: infrastructure projects being executed by both central and state governments, quick demand creators that leave money in the hands of people.

“Consumption is flat, and there is some risk involved due to elevated food prices, particularly coming from rural consumption demand. It (the consumption story) is somewhat intact but is not a key driver of economic performance,” Barua said.

Consumer food price inflation was 9.94% in August, pushing headline inflation to 6.83%. Barua also said that at the middle to upper tier of the consumer pyramid, there has been significant traction. He expects the economy to grow at 6.3% this fiscal, a notch below the Reserve Bank of India’s forecast of 6.5%.

Automaker Mahindra & Mahindra Ltd on Sunday reported a 20% jump in domestic passenger vehicle sales in September, while domestic tractor sales saw a 10.75% decline. Hero MotoCorp Ltd reported a 3% improvement in September in its domestic two-wheeler sales, which is often seen as a proxy for the health of the rural economy.

Consumption could pick up in the festive season, but since it is seasonal, it remains to be seen how it will impact year-on-year growth. In the first quarter of this fiscal, household consumption, a key engine of growth, had stayed nearly steady, according to data from the statistics ministry.

In its latest monthly economic review for August, the finance ministry retained its 6.5% real GDP growth for this fiscal and said that the second quarter of this fiscal that ended in September was shaping well, with the monsoon deficit of August partially getting plugged in September and selected food items which drove inflation up being on the retreat. The private sector is in good health, according to the ministry.

The Centre had collected ₹8.65 trillion in direct taxes up to 16 September after accounting for tax refunds, showing a 23.5% jump in receipts and meeting a little more than half of the full-year direct tax target.