Skip to main content

GST compensation cess mop-up rises for first time in five months

 Goods and services tax (GST) collections slumped to a three-month low in August, and came in 12 per cent lower year-on-year (YoY), indicating slower recovery in economic activity. However, compensation cess collections rose for the first time in five months, and 6 per cent YoY, amid the tussle between the Centre and states. The overall mop-up remained well below the Rs 1-trillion mark for the sixth straight month owing to the pandemic, even as unlocking began in June. GST collections stood at Rs 86,449 crore in August, compared to Rs 87,422 crore in July, according to finance ministry data. It was at 88 per cent of August 2019 collections. A large portion of the fall could be attributed to imports, which were down 23 per cent YoY, while domestic transactions were down just 8 per cent YoY. “During the month, revenues from imports were at 77 per cent and revenues from domestic transactions (including import of services) at 92 per cent of revenues from these sources during the same month last year,” the ministry of finance said in an official release. However, in July, revenues from domestic transactions had touched 96 per cent of last year’s levels, with imports at 84 per cent of the same. “It may be noted that taxpayers with turnover below Rs 5 crore continue to enjoy relaxation in filing of returns till September,” the ministry explained in the release. In order to improve collections, the government is planning more anti-evasion measures, including e-invoicing for large firms with turnover of Rs 500 crore, from October 1. Compensation cess came in at Rs 7,215 crore in August — 5.7 per cent higher than the Rs 6,822 crore in August 2019. The GST Council is expected to meet in a week to discuss the two options on an alternative compensation mechanism proposed by the Centre.

Central GST collections fell to Rs 34,122 crore in August, against Rs 39,467 crore in July. State GST collections stood at Rs 35,714 crore, lower than Rs 40,,256 crore during the previous month. Integrated GST mop-up was also lower at Rs 42,264 crore, compared to Rs 42,592 crore in the previous month. Among large states, a sharp decline in collections was seen in Maharashtra, Karnataka, and Tamil Nadu at 13 per cent, 11 per cent, and 12 per cent, respectively. Delhi saw an 18 per cent fall. However, a marginal rise was recorded in Rajasthan and UP, whereas a slight drop was reported by Haryana and Gujarat. Pratik Jain, partner and leader (indirect tax), PwC India, said it was relevant to note that the percentage drop was higher for smaller states. As things open up gradually, collections are likely to be rise progressively. Abhishek Jain, tax partner at EY, said a significant part of the dip was attributable to imports, which have declined owing to the impact of coronavirus on global trade. M S Mani, partner at Deloitte India, said that in the backdrop of disappointing GDP data for Q1, the GST figures indicate that collections are in recovery mode. “The fact that GST collections on domestic transactions were just 8 per cent lower YoY indicates a revival. The sharp drop of 23 per cent in import GST could be on account of various import-substitution measures. It is expected that collections in the coming months will enable it to reach last year’s levels in a month or two,” he added.

Business Standard, 2nd September 2020


Popular posts from this blog

April GST collections at new high despite rate rationalisation in December

Goods and services tax (GST) collection touched a record high in April, exceeding Rs 1 trillion for the third time in four months. The mop-up was 10 per cent higher over the previous year. Gross collection for the month was Rs 1.13 trillion, said the finance ministry. Despite the recent rate rationalisation in December, a rise in collection was reported. Of the total collected, the CGST (central GST) contributed Rs 21,163 crore, the SGST (state GST) Rs 28,801 crore, the IGST (integrated GST) Rs 54,733 crore (including Rs 23,289 crore on import) and cess Rs 9,168 crore (including Rs 1,053 crore on import). After settlement of the IGST and the balance IGST in a 50:50 ratio between the Centre and states on a provisional basis, the CGST stood at Rs 47,533 crore and SGST at Rs 50,776 crore. The CGST target in the Union Budget for 2019-20 is Rs 6.1 trillion. “The April collection indicates the tax base is increasing gradually, with GST getting stabilised with measures such as e-way bills and…

Defaults are Costly: Bankruptcy Law Gives Lenders More Teeth

Lenders can bargain strongly on asset recovery, defaulting borrowers can lose control of co With the Bankruptcy Act in place, banks can breathe easy, at least in the medium term, as corporate borrowers will now intensify their efforts to avoid loan defaults and the likely loss of management control of business, said Moody's Investors Service. This will empower lenders to bargain strongly in matters of asset recovery, while borrowers can gain with lower borrowing costs after three-four quarters. “The (defaulting) borrowers will lose control of the company as soon as the process is initiated,“ Srikanth Vadlamani, vicepresident, Financial Institutions Group, Moody's Investors Service, told ET from Singapore.“This, in itself, should act as a key incentive for them not to default in the first place.“ A few weeks ago, the government passed the Bankruptcy Bill, introducing a time-bound settlement process against loan default. With the Bankruptcy Act, the resolution process-from the date …

SC order on RBI circular: More options for banks to tackle defaulting firms

Lenders also have the option of restructuring the loans Lenders to companies which are under stress could now have three options to deal with them if they default on loans: take a haircut as part of a one-time settlement, restructure the loans for a longer tenure as they did when corporate debt restructuring schemes were allowed, or go to the Insolvency and Bankruptcy Code (IBC) for redress. These changes in the options available to lenders come, according to PE funds and bank lawyers who are involved in the IBC process, in the wake of the Supreme Court on Tuesday setting aside the 12 February RBI circular, which allowed a 180-day window to banks to resolve a company default.But they can still find a resolution. According to a Reserve Bank of India circular, a loan becomes a non-performing asset when banks cannot find a way of recovering their money in 90 days. In short, banks still have a window to resolve the default. Lenders can take a haircut as part of a one -time settlement of du…