BackManufacturing picks up pace, GST climbs
Festive demand keeps factories humming, GST counter ringing in Nov
PremiumThe Indian economy is starting to fire on more cylinders, though it remains at risk of weakening because of the Omicron strain of the coronavirus and faster inflation.
Festive sales and pent-up demand drove November goods and services tax (GST) revenue to ₹1.31 trillion, surpassing the previous month’s collection and clocking the second-best performance since the rollout of the new indirect tax system four years ago.
The higher demand kept factories humming in November. The Manufacturing Purchasing Managers’ Index, or PMI, rose from 55.9 in October to 57.6 in November, the most substantial improvement in the manufacturing sector’s health in 10 months, IHS Markit said on Wednesday.
The fact that firms purchased additional inputs at a higher rate, combined with declines in inventories of finished goods and tentative signs of a pick-up in hiring activity, indicate that production volumes will likely expand further in the near term, said Pollyanna De Lima, economics associate director at IHS Markit. “The key threat to the outlook, in addition to potential new waves of covid, is inflationary pressures. For now, companies are absorbing most additional cost burdens and lifting output charges only moderately. Should raw material scarcity and shipping issues continue to feed through to purchasing prices, substantial increases in output charges could be seen and demand resilience would be tested," she cautioned.
The government’s November GST collection, a proxy for demand, rose 25% from the previous year and 27% more than the receipt in the same month in FY20, a finance ministry statement said. After regular settlements, the Centre collected ₹51,251 crore and states got ₹53,782 crore in November.
Experts said GST receipts have now stabilized at a level that will enable exceeding the revenue targets for FY22.
The finance ministry said the November GST collection is second only to that in April, which is related to year-end revenues. It has crossed the October collection as well, which also included the impact of returns required to be filed on a quarterly basis. This is very much in line with the trend in economic recovery, the ministry said.
“The recent trend of high GST revenues has been a result of various policy and administrative measures that have been taken to improve compliance. Central tax enforcement agencies, along with state counterparts, have detected large tax evasion cases, mainly cases relating to fake invoices, with the help of various IT tools developed by GSTN that use the return, invoice and e-way bill data to find suspicious taxpayers," the ministry said. GSTN is the company that processes tax returns.
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