GST collection up, but overall picture is still grim | Deccan Herald

There is encouraging news for the government on the tax front with an increase in revenues from the Goods and Services Tax (GST) and other taxes like the personal income tax. The most important part of the increase is accounted for by the rise in GST income in December. At Rs 1.15 lakh crore, the GST revenue for that month was the highest ever for any month after the new tax system was introduced in 2017. This is a positive trend, as GST collections have stayed above Rs 1 lakh crore in the past three months and was 12% more than the corresponding period of the previous year. GST collections are an important measure of the state of the economy, and the government has said that the increase shows the rapid recovery of the economy after the serious setback it received last year with the spread of the Covid-19 pandemic.

The government has also claimed that the increase in collections is the result of better compliance. The authorities had launched a crackdown on evaders, using data analytics to detect fraud and evasion and plugged leakages by examining audit trails. But other factors also could have accounted for the performance. The December GST figures reflect the economic activity in November. The festival season extended to November and may have contributed a part of the increased revenues. This increase in demand may have tapered off later. It should also be noted that the calculation of growth rates on a low base will continue in the coming months, exaggerating the performance. But there are some likely boosters also. New rules have come into effect from January 1 and they may help to further reduce evasion. There are other favourable trends like the increase in imports and the growth in auto sales.

Apart from the GST, gross tax collections have also registered an increase. There was a 23% increase in November, though the gross revenue for the year till November is less than for the same period last year. There is also the chance of disinvestment income falling short of the target. Despite the signs of improvement, the overall picture of the economy remains grim. The index for core sectors, including steel and cement, contracted in November. Investments in the last quarter had a steep fall from the levels of the same quarter last year. Employment levels have shown a decrease in the past three months. Though the interest rates are low, there has been little credit outgo from banks which are still not very enthusiastic about lending. The government will do well to take into account this wider economic picture as it prepares the Union Budget.

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