GST receipts in FY18 show promise despite disruptions after rollout

Live mint By Gireesh Chandra Prasad | Remya Nair Mon, Apr 30 2018. 08 39 PM IST

The trend hints at GST revenue collection picking up momentum on account of two growth drivers—a simpler but tighter compliance regime that will be in force soon and the ongoing economic recovery

GDP growth has progressively improved from 5.7% in the April-June period of FY18 to 6.5% in the second and 7.2% in the third. A 6.6% growth in full fiscal year FY18 projected by the statistics ministry implies a 7% growth in the last quarter.

New Delhi:Despite the disruptions that followed India’s single biggest tax reform in 70 years of independence, revenue receipts did not fall far below the targeted monthly average in the first year while the annual shortfall for the Union and many state governments was largely due to an accounting issue.

The trend hints at GST revenue collection picking up momentum on account of two growth drivers—a simpler but tighter compliance regime that will be in force soon and the ongoing economic recovery. GDP growth has progressively improved from 5.7% in the April-June period of FY18 to 6.5% in the second and 7.2% in the third. A 6.6% growth in full fiscal year FY18 projected by the statistics ministry implies a 7% growth in the last quarter.

Average monthly GST receipts in the August-March period were Rs89,885 crore, a tad below the combined targeted Rs91,000 crore for central and state governments. For the nine months since GST was rolled out on 1 July, the combined target was Rs8.2 trillion, but has netted Rs7.41 trillion as central and state GST collections for the sales in March got spilled over to April, an accounting effect in the year of implementation. For the same reason, central government’s indirect tax revenue receipts for FY18 fell short of the targeted Rs9.2 trillion by Rs51,856 crore in the revised estimates, as per budget documents.

A finance ministry official, however, said revenue collections are already improving. “GST receipts in April (for sales in March) is expected to be around Rs95,000-96,000 crore,” said the official, who spoke on condition of anonymity. The official, however, added that there could be monthly variations in indirect tax receipts on account of festivals, year end, and other seasonal factors impacting movement of goods in the supply chain.

A few rule changes in the offing for tightening compliance is expected to add momentum to this revenue growth. The continent-sized Rs2.4 trillion economy dropped inter-state trade barriers and is adopting uniform electronic document for goods shipment anywhere in the country. Electronic permits called e-way bills are in place for inter-state movement from 1 April and are being rolled out for local transportation.

The authorities are now linking e-way bills generated by businesses for goods shipment with their sales returns in GSTR 1 form to detect tax evasion. “Same invoices go into e-way bill and to GSTR 1. Once GSTR 1 returns are filed, we can match the data. We know who the sender is and who the buyer is. We can pick up all the e-way bills of a sender and see if they are part of the GSTR-1 filed,” said Prakash Kumar, chief executive officer of GST Network, the company that processes tax returns. Although taxpayers can opt for automatically filling their e-way bill details in GSTR 1, many are yet to opt for it.

The increasing linkage between direct and indirect tax return filings is also expected to check tax evasion. The income tax return forms for assessment year 2018-19 mandate small businesses to quote their GST identification numbers (GSTIN). Everyone opting for presumptive taxation scheme under income tax law will have to provide their GSTIN and details of turnover reported under GST, as the government seeks to check tax evasion among small businesses. Under presumptive tax scheme, businesses with a turnover of less than Rs2 crore need not maintain books of accounts and instead, pay income tax on the basis of a certain percentage of their turnover.

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