Clipped from: https://economictimes.indiatimes.com/markets/expert-view/4-reasons-why-gst-collections-hit-record-high-in-december/articleshow/80099278.cmsSECTIONS4 reasons why GST collections hit record high in DecemberLast Updated: Jan 04, 2021, 06:36 PM ISTSynopsis
While we are going into the recovery zone, we should not lower our guards down, says the finance secretary.
We have brought in changes at the systemic level. All these measures will lead to improved compliance and that together with higher economic activity will lead to better revenue, says Finance Secretary Ajay Bhushan Pandey.
GST collections have been the highest since its inception. What do you attribute this to and does it convey a larger picture about sustainable recovery in the Indian economy?
In December, the collection was more than Rs 1,15,000 crore. It conveys the transactions or the businesses which were done in November. November was immediately after Diwali and there was a resurgence of corona in various parts of the country which resulted in movement restrictions and then lockdowns in certain parts of the country and then the businesses did get impacted. However, there was a trend of the business recovery or economic recovery and that was one of the important factors in the higher collection in December.
But apart from that two more things have happened: For the last several months, we have been working on bringing many systemic changes within the GST for which the work was already going on in the last one and a half years. For example, in September, we brought in the Aadhaar based GST registration because the purpose was that on one hand you make the life simpler for the honest taxpayer, and at the same time check the fraudulent elements who used to get registrations and then they used to indulge in fraud.
Also, earlier, input tax credit was on basis of self-assessment and there also, those who had honest intention would take only the eligible input tax credit whereas there were certain elements who thought that perhaps they could take any amount of input tax credit and also pass on the input tax credit. In December, the GSTR-2B was brought in which basically shows the entire input tax credit that one is eligible for and it shows the invoice price, the supplier. The tax filing has become much simpler now because the taxpayer does not have to calculate how much input tax credit he is getting from each invoice. At the same time, those who were trying to take an excessive input tax credit will be deterred.
The third factor is also very important. Now we have income tax data that includes the GST and then the customs and we are in a position to do data analytics through artificial intelligence tools. We can draw an entire network diagram if any fake bill has been generated by any non-existent or fake dealers. No matter how many intermediaries or shell companies that fake bills have passed through, we are able to reach the ultimate beneficiary and the result was that more than 187 arrests were made during the last one and a half months which included managing directors, directors, partners and also five chartered accountants and one company secretary were arrested.
The fourth factor which I would like to mention is we brought in this electronic invoicing. This started from 1st of November. It has fully stabilised for the companies who are having a turnover of more than Rs 500 crore. Now companies having turnover of more than Rs 100 crore are also required to issue invoicing.
So you are saying that you have been able to counter a lot of people who up until now were gaming the system. But how sustainable is this trend of Rs 1.15 lakh crore? Is it a one-time thing ?
We have brought in changes at the systemic level. All these measures ultimately will lead to improved compliance and that together with higher economic activity will lead to better revenue.
What is your assessment so far in terms of indirect and direct tax collections?
We have already discussed the measures on GST. On the custom duty front also, in December we had a very good collection. It is something like Rs 16,000 crore. Last year December, the collection was Rs 8,300 crore, so it is almost 94% increase. But the assessable value has not increased by that proportion. Assessable value has increased only by 17% though custom duty collection has increased by 94%.
Similarly if you compare the direct tax, corporate tax as well as the personal income tax collection with last year’s figure, till the second quarter we were down by almost 22-23%. But by the end of the third quarter, the gap has reduced to 9.9% and we hope that in the next quarter and by the end of the financial year this gap will be further reduced. How much will ultimately be the gap, how much exactly we will collect in the indirect tax or the direct tax as one quarter remains and we are in the middle of budgetary exercise. So, we will make a revised estimate of how much revenue we will collect in each of the heads of the revenue and then we will come up during the budget.
Last year, in terms of direct tax collections, we were able to get about Rs 10.8 lakh crore. Will we be able to hit that mark this time around?
It is very difficult to give any definite figure at this point of time. I can only tell you the trend. In direct tax that we are down by 9.9%. Now so far as the indirect tax is concerned, we have already discussed the GST. In the indirect tax as well as in the direct tax for the first three-four months, we had a very severe impact and it is very difficult for the transactions which did not happen to necessarily happen during the rest of year and for the government to get the tax revenue.
Therefore all those assessments will have to be made. Currently what all of us within the ministry of finance are trying to assess is what we have achieved in these nine months and what we lost and then how much we will be able to make up during the next three months and what will be the ultimate shortfall. We will be able to tell you only when we present the budget.
At this point of time where do you see the year ending?
Just see the estimates of the GDP growth during the first quarter and the second quarter. Some of these agencies for example the RBI or international bodies like IMF, World Bank all had given the estimates of the first quarter and of course it has already happened. The second quarter also has happened. The third quarter estimates would come. They have also given the estimates of the whole year also and they are in a certain range. Somebody has estimated somewhere around 6-7%; someone has even estimated 4%. These are all ranges.
We also have data about the certain parameters like the PMI index, the e-way bill, the e-invoice, the electricity consumptions which are showing a faster pace of recovery. That is coupled with the actual tax collection that we spoke about. We hope we are going into a positive territory. There is a faster pace of recovery. Exactly what will be the growth is something I would postpone till the budget time and at that time we will be in a position to give you a good idea of where exactly we will end by the end of this year.
Do you think if the Covid cases were to rise, then that could be one of the risk factors as far as India’s recovery is concerned?
When you are in the middle of this kind of a pandemic which is going to continue for several quarters or months, risks always remain. Therefore what is more necessary is that while we are going into the recovery zone, we should not lower our guards down. The people should continue to take precautions and then carry out the economic activities and also at the same time we should keep monitoring the various sectors or the various groups to see how they are performing and if any intervention is needed, we should be in a position to intervene and try and mitigate those measures.