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NEW DELHI : India’s Goods and Services Tax (GST) revenue collections are likely to stage a recovery from July after falling in May and June, official data on e-way bills for the first fortnight of June indicated, highlighting the gradual resumption of economic activity in line with a decline in coronavirus cases and easing of lockdown curbs.

Data from GSTN, the company that processes tax returns, showed that the average e-way bills generated this month until 13 June stood at 1.61 million, 25% more than the daily average reported for May.

It also showed a reversal of the sequential decline seen in April and May after a peak of 2.29 million average daily e-way bills reported in March.

Improving fortunes
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Improving fortunes

The data on increasing goods transport is encouraging as policymakers are betting on the retreat of the second wave of the pandemic and the easing of mobility restrictions by states for economic recovery and employment generation.

As taxes are paid a month after sales, the uptick in electronic goods transportation permits seen so far in June could translate into improved GST revenue collections in July. This month, however, tax collections are set to moderate sequentially in line with the decline in e-way bill generation in May.

Rajesh Gupta, co-founder and chief technology officer of BUSY Infotech Pvt. Ltd, an accounting software maker, said the second wave of the pandemic, which led to a moderation in the generation e-way bills in April and May, has taken a heavy toll on several sectors, including retail and transportation.

“We are certain that the businesses will regain their momentum from June and continue to pick up in July and further in coming months," said Gupta.

Central and state governments collected 1.02 trillion in May after a record 1.41 trillion in April.

Industry people attribute the record GST receipts in April to a host of factors including higher commodity prices and businesses trying to clear inventory in the last month of FY21.

With mobility restrictions getting eased and the forecast of a good monsoon, many analysts have predicted economic growth picking up in the coming months.

Analysts also see a centralized vaccination policy supporting growth.

However, the level of pent-up demand may be less than what was seen last year when India emerged from a harsh national lockdown. Higher healthcare and fuel expenses are also seen as factors that may limit demand pick-up.

According to Archit Gupta, founder and chief executive officer of Cleartax, an online tax service provider, an uptick in e-way bill activity will likely reflect on improved GST collections as well.

“Strong GST collections will help the government meet fund requirements of states and help with carrying out covid relief work. However, small businesses may still need a lot of help to come out of the crisis caused by covid," he said.

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