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Decoding GST Dynamics: From Collections to the Future Fiscal Canvas

In December, the Goods and Services Tax (GST) collections experienced a dip, reaching a three-month low at approximately Rs 1.64 lakh crore. The figures reflected a decrease from the previous months, with collections standing at Rs 1.67 lakh crore in November and Rs 1.72 lakh crore in October. September’s collection amounted to Rs 1.62 lakh crore. The recent trend has been marked by an increase in notices to companies for the recovery of unpaid GST from earlier periods.

LIC, on Monday, disclosed that tax authorities had issued a demand notice of about Rs 806 crore, alleging a shortfall in GST payment for the fiscal year 2017-18. Concurrently, leading FMCG giant Hindustan Unilever Ltd revealed GST demands and penalties totaling Rs 447.5 crore from tax authorities. Zomato Ltd, an online food delivery firm, also faced a significant Rs 401.7-crore GST liability show-cause notice related to delivery charges.

While the fiscal year has witnessed a 12% rise in collections until December, analysts caution against solely relying on percentage growth figures. The true measure of efficiency lies in assessing whether the collections have outpaced GDP growth, indicating tax buoyancy. Vivek Jalan, partner at Tax Connect Advisory, emphasized that with inflation at 5.5% and GDP growth at 6.5%, the 12% growth in GST revenues merely aligns with real economic growth. This suggests a lack of significant tax buoyancy.

The finance ministry reported that in December, the Centre received Rs 30,443 crore from GST, while the states received Rs 37,995 crore. The Integrated GST, pertaining to tax collected on inter-state purchases, stood at Rs 84,255 crore, including Rs 41,534 crore from imports. Total cess collections amounted to Rs 12,249 crore, with Rs 1,079 crore collected on the import of goods. The figures indicated a 10% increase compared to the same month a year ago.

M.S. Mani, a partner at Deloitte India, commented on the December collections, noting that they establish a new normal of Rs 1.6-lakh-crore-plus, showcasing robust collections unaffected by festive or seasonal factors. The underlying economic growth across sectors contributes to this stability. However, Mani highlighted the need for deeper analysis of the lack of growth in GST collections in specific states such as Rajasthan, Chhattisgarh, and Jharkhand.

As the fiscal year progresses, the interim budget is anticipated to set higher targets for 2024-25, potentially laying the groundwork for the next phase of GST reforms. The path ahead involves careful scrutiny, policy adjustments, and a strategic approach to align GST collections with the evolving economic landscape.

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