December’s revenues signal some post-festive fervour in the economy
At almost ₹1.5 lakh crore, Goods and Services Tax (GST) inflows in December 2022 signal a recovery of sorts from November, when revenues fell to a three-month low. November 2022 revenues were 10.9% higher than a year ago, but still marked the slowest growth since June 2021. December’s revenues were 2.5% higher than November and reflected a 15.2% year-on-year uptick. While the ₹1,49,507 crore GST kitty in December is the third highest since the beginning of the indirect tax regime in July 2017, it may be more noteworthy than previous records. First, as these taxes are linked to economic activity undertaken in November, they indicate that factories and service providers were busier than they were in October, impacted little by post-festival consumer fatigue. Second, on the two other occasions that GST revenues were higher — ₹1.67 lakh crore in April 2022 and almost ₹1.52 lakh crore in October — the numbers were boosted by taxpayers’ financial year-end reconciliations and pre-festive spending or stocking up, respectively. This was not the case in December. Arguments that high inflation bolstered these numbers are only partly tenable — headline inflation dipped to an 11-month low of 5.9% in November, services inflation was flat sequentially, and goods inflation was 6.2%, which is high but far lower than previous months. So, if inflation did nudge up revenues, it did not play any more of a role in December than it did in earlier months when price rise was higher.
From what is known so far, the eight core sectors rebounded to grow 5.4% in November from a mere 0.9% in October, when industrial output tanked an alarming 4%. While November’s industrial production levels will only be known later this month, the GST revenues indicate that the demand for both goods and services held up. As North Block mandarins enter the last lap of curating the Union Budget, the latest GST print should provide some hope while working out the fiscal glide path and revenue aspirations for the coming year. Not only have GST collections been over ₹1.4 lakh crore for 10 straight months, December’s healthy inflows lift up the average monthly intake of 2022-23 to ₹1.49 lakh crore. But there is little room for complacency — any slackening in economic activity due to global headwinds could drag down revenues too. The GST Council, which met briefly last month after a long break but left critical reforms hanging, must be convened soon after the Budget — not just to help sustain revenue inflows, but also to aim to rake in more from a rationalised rate structure which brings all the presently excluded items into the One Nation, One Tax ambit.