The government says Goods and Services Tax (GST) collection in March had crossed Rs 1.03 trillion. The finance minister called it a landmark achievement.
We have to see the trend in the coming months. The industrial outlook survey from the Reserve Bank of India says capacity utilisation bottomed out in the first half (H1) of the past financial year (FY18) at 72.2 per cent, reflecting the lagged impact of demonetisation and initial uncertainty around the rollout of GST. However, with gradual progress in remonetisation, finetuning of the GST architecture, continued support from public capital expenditure and improvement in global demand, capacity utilisation jumped to a 13-quarter high of 72.9 per cent in the third quarter (Q3) of FY18.
Data on growth in manufacturing and jobs also looked better. An increase in the Purchasing Managers Index showed greater confidence of businesses that a broadbased economic revival was slowly getting entrenched. The prospect of a normal monsoon has added to the overall optimism. The positive sentiments have outweighed the risks of reduced oil supplies from Iran and Venezuela, a weakening rupee, a spike in commodity prices and, consequently, in inflation and interest rates.
The government has cautioned that the March revenue figures cannot be taken as a trend for the future. For, it is usually noticed that in the last month of the financial year, people also try to pay the arrears of some previous months. Even so, in the past few months, the focus of the government and the GST Network, the tax’s information technology backbone, has been to ease compliance and the process of filing returns. So, nearly 69.5 per cent of those registered had filed the returns in April. However, out of 1.9 million composition dealers, only 1.1 mn filed their quarterly return (GSTR-4), paying a total tax of Rs 5.79 bn.
The March collection figures alone do not tell the full story, in the absence of figures regarding refunds to be given. Refunds due to exporters since February have been held up and many claims are pending for even the previous months. The government must put out the figures of pending refund claims, so that a clearer picture emerges.
The Directorate of Revenue Intelligence has sent notices to a large number of exporters, to pay Integrated GST (IGST) with interest on import made on a replenishment basis under advance authorisation for physical export. Many have, boosting the revenue collection figures. They will take input tax credit on the IGST paid and utilise it for payment of GST in the coming months.
It is likely that with the improved economic climate, introduction of e-way bills and improved GST compliance, collections would continue to show a positive trend. There has been smooth rollout of the e-way bill system, fear of stronger anti-evasion measures and increased familiarity with the new regime. In addition, more improvement in systems and procedures for filing of returns, cautious introduction of invoice matching and the reverse charge mechanism should help large numbers of smaller businesses to come into the GST net, preferring compliance to the risk of staying out.
However, for the economy to go full-steam ahead export must grow at about 25 per cent a year and private investment must also pick up soon.
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