New Delhi: Driven by festive demand, the Goods and Services Tax (GST) collections for the Union and state governments climbed to Rs.1.82 trillion in November, marking an 8.5% year-on-year growth, according to official data released on Sunday. Sequentially, however, the latest collection figures are lower than the Rs.1.87 trillion reported in October, which was the second highest reported so far since the new indirect tax regime was introduced in 2017. The highest-ever GST collection of Rs.2.1 trillion was reported in April. The consumption tax figures highlight the positive impact of the recent festive season on goods purchases, providing a much-needed boost the industry had been anticipating.
The uptick in GST collections driven by festive demand had been anticipated by policymakers, who remain optimistic about sustained growth in rural consumption and an improvement in urban demand. The Ministry of Finance, in its latest monthly economic review released last week, stated that India’s economic momentum showed signs of revival in October.
Backed by high-frequency indicators- This recovery was supported by high-frequency indicators such as the Purchasing Managers’ Index (PMI) and e-way bill generation, signalling a rebound in rural and urban demand, the ministry said. The latest budget for FY 25, announced in July, estimates that total GST collections are expected to increase by 11.6% to Rs.10.6 trillion during the fiscal, similar to the estimate in the interim budget.
“The domestic GST revenue growth of 10% plus in FY25 seems to support the GDP data which indicates an increase in domestic consumption. The import GST revenue growth of 6% also backs foreign trade data which indicates slower growth of non-petroleum imports," said MS Mani, partner at Deloitte India. "The projected GDP growth of 7% in FY25 augers well for GST collections in the remaining four months of the current fiscal year, because the collections in the first 8 months of FY25 have exceeded that of FY25 by more than Rs.1 trillion and are ahead of the budget estimates for FY25," he added. About Rs.19,259 crore was issued as tax refund by the authorities in November, down 8.9% from the year-ago period. After tax refunds, the centre collected Rs.34,141 crore in November while states collected Rs.43,047 crore. Revenue receipts from imports and inter-state sales stood at Rs.91,828 crore and cess at Rs.13,253 crore. Interstate sale revenue is shared by the centre and states.
Healthy growth- Among the states, Jammu & Kashmir (25%), Bihar (12%), Sikkim (52%), Mizoram (16%), Tripura (18%), Assam (10%), Odisha (10%), Delhi (18%), among others, saw healthy GST revenue growth during November, suggesting higher economic activity in these regions. Despite the overall growth in GST collections, single-digit increases in key states like Haryana (2%), Punjab (3%), Uttar Pradesh and Madhya Pradesh (5%), Tamil Nadu (8%), and Telangana (3%), coupled with negative growth in Rajasthan (-1%), Andhra Pradesh (-10%), and Chhattisgarh (-1%), are a cause for concern as these states have substantial manufacturing capacities and are pivotal to the nation’s economic framework. "The recent increase in tax collections, particularly in states like Delhi, Maharashtra, and Karnataka, can be attributed to the festive season last month. However, it is premature to interpret this as a sign of broader economic growth," said Saurabh Agarwal, tax partner at EY. "Given the recent GDP data for the September 2024 quarter, we anticipate lower tax collections in the next four months. Additionally, the global geopolitical landscape and potential decrease in consumption could further dampen short-term economic growth," he added.
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