New Delhi: Buoyed by festival demand, Goods and Services Tax (GST) collection of the Union and state governments shot up to ₹1.87 trillion in October, the second highest reported so far since the new indirect tax regime was introduced in 2017, official data showed on Friday.
The highest ever GST collection of ₹2.1 trillion was reported in April.
GST revenue collection in October shows an 8.9% annual growth from what was collected in the year ago period. In September, ₹1.73 trillion was collected as GST, showing a 6.5% annual growth in that month.
Figures for the tax on consumption show that the ongoing festival season had a salutary effect on purchase of goods, which the industry was banking on. Tax received in October is for transactions in September.
The improvement in GST collection due to festival demand was expected by policy makers, who are optimistic about continued improvements in rural consumption. Policy makers are, however, watchful about what they see as a moderation in urban demand.
The monthly economic review of the finance ministry had pointed out that rural demand continues to improve, but any spillover effects of external factors like geopolitical conflicts could cause negative wealth effects, impacting household sentiments and altering spending intentions on durable goods.
The growth in GST collection seen in October is on account of an excellent combination of festival season sales and increased compliance, explained M.S. Mani, partner, Deloitte India. However, the driver appears to be domestic supplies with collections from imports increasing by only 3.6%, said Mani.
Some experts pointed out that year-on-year growth rate in monthly GST receipts this year is lower than that of the year before. Data showed that in FY24, the average monthly revenue collection growth was 11.75%, which moderated to 9.4% so far this financial year, slightly below the 10.5% nominal GDP growth the finance ministry expects for the year.
“The single-digit growth signals a cooling-off period,” said Saurabh Agarwal, tax partner, EY.
The collections made in this month on account of the festival season, particularly the performance of the automobile sector, will be crucial in determining the short-term trend. “While the festive season is expected to boost collections, the overall outlook for the near future remains cautious,” said Agarwal.
Over ₹19,300 crore was issued as tax refund by the authorities in October, showing an over 18% improvement from the year ago period.
Mani of Deloitte India said this sharp increase indicates the stabilisation of the refund process and reduction in rejections due to issues of interpretation.
In October, the GSTs collected from the cess levied on goods like automobiles and aerated drinks, showed a less than 1% improvement at ₹ ₹12,550 crore, reflecting the sluggish performance of the automobile sector in September.
Automobile sales had seen an overall 9.3% sales contraction in September, the Federation of Automobile Dealers Associations said last month.
In October, the sector showed a mixed trend. The largest carmaker in the country Maruti Suzuki India Ltd on Friday reported that it has sold the highest ever units in a month, in October. Sales volume jumped to 206,434 units in the month, growing 3.6% from the year-ago period. Tata Motors sold over 82,682 units in October, a notch below what it sold in the same time a year ago. Mahindra & Mahindra Ltd sold 96,648 vehicles in October, showing a 20% annual growth from the same time a year ago.
Taxes for the sales in October will be part of the revenue collected in November.
After tax refunds, the Centre collected ₹31,300 crore in October while states collected ₹38,717 crore. Revenue receipts from imports and inter-state sales stood at ₹85,969 crore in the month. Inter-state sale revenue will be shared by the Centre and states.
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