GST: Missing Data Points, Lower Revenue Collection And Fiscal Worries
Five months into implementation of the Goods and Services Tax and there is still little clarity on the efficacy of the tax system and the impact on fiscal revenue collections.
On Monday, the finance ministry reported that as on Nov. 27 it had collected Rs 83,346 as total revenue for October. This compares poorly with the Rs 92,150 crore collected in September (as of Oct. 23), Rs 90,669 crore in August and Rs 92,283 crore in July.
The number of filers is also lower than in previous months—50.1 lakh in October compared to 58.7 lakh, 58.9 lakh and 57.3 lakh for July, August and September, respectively—but could climb due to late filings.
“GST collections, till November 27, remain well below the desired level of indirect tax collections,” said a Kotak Institutional Equities report.
Compliance remains low (around 50 percent) and is unlikely to increase significantly till the complete framework (returns matching, e-way bill, reverse charge, etc.) are implemented fully.Kotak Institutional Equities Report
A Credit Suisse report concurred.
“GST collections fell much short of our estimate of the seasonally adjusted revenue neutral threshold,” it said, also emphasising on missing data.
There are too many data points missing for us to conclude with any confidence whether GST is delivering more revenues than required or less.Credit Suisse Report
The finance ministry's statement indicated that the GST collections were lower on account of
- IGST credit being utilised for payment of SGST and CGST and therefore, the inflow of new taxes is low.
- lower GST rates.
- tax administration of GST is now based on a self-declared tax return.
- delayed implementation of some of the main features of GST such as, matching of returns, e-way bill as well as reverse charge mechanism.
The statement “was quite defensive, emphasizing how self-disclosure and the drop in rates may be responsible for the sequential drop in Oct. GST collections,” noted Credit Suisse.
Kotak expressed concerns about fiscal revenue slippage compared to budgeted levels.
“Our calculations indicate that the government required a monthly run-rate (including petroleum products) of around Rs 750 billion from July 2017 – March 2018. We estimate that the average run-rate has been around Rs 500-550 billion; much lower than the required, till now.”
But Credit Suisse remained sanguine about the fiscal impact saying that the data release is likely to add to the fog on macroeconomic parameters in India, but that it remains “comfortable with the aggregate collections of GST”.
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