Past performance is not necessarily indicative of future performance—the warning aptly fits goods and services tax (GST) revenue collections.
In a first, GST revenues for the month of March collected in April surpassed Rs1 trillion. Since composition dealers also paid quarterly taxes this time, the level of compliance and tax buoyancy improved, but tax adjustments during the fiscal year-end too contributed to pushing overall collections higher.
“It is usually noticed that in the last month of the financial year, people also try to pay arrears of some of the previous months. Therefore, this month’s revenue cannot be taken as a trend for the future," the finance ministry said in a press release.
Though the e-way bill mechanism would keep compliance higher in April, the odds are this kind of a revenue collection performance may not be repeated in the near term.
While the GST regime has stabilized to a large extent, the monthly average collections are seen hovering in the range of Rs90,000-95,000 crore in the coming months, say tax experts.
The focus now shifts to the GST Council’s decision on a revised returns filing format to be announced at its meeting on 4 May.
Cumbersome procedures, stringent deadlines and technological glitches on the online portal made filing of GST returns a nightmare for taxpayers, and this is suspected to have resulted in tax evasion.
In a bid to curb revenue leakages, the group of ministers headed by Bihar deputy chief minister Sushil Kumar Modi reviewed two models and a fusion form will be designed by incorporating the best features of these models. Both models recommend filing one form each month, but a key differentiator is the method of granting input tax credit.
For tax buoyancy and compliance to remain at higher levels, it is essential to keep returns filing simple and the interest of industry in getting credit upfront should be considered in the fusion model to avoid working capital impact on businesses, point out tax experts.
Meanwhile, the GST Council has set Rs12 trillion as the target for GST collections for the current fiscal year. While the target does not look too ambitious, a lot of other anti-tax evasion measures have to fall in place along with robust economic growth for it to become achievable.
“A revenue target of Rs1 trillion per month could appear to be a stiff target in the backdrop of the GST performance till now, however several measures such as reverse charge, invoice matching, return simplification, etc. could lead to enhanced GST collections during the current fiscal in the backdrop of good economic growth," said M.S. Mani, partner at Deloitte India.
Much depends on achieving the revenue targets, given the propensity to spend in a pre-election year, which will have an effect on the fiscal deficit.