GST collection hit a record-high in April 2021, but there is a catch. Details here

The second wave of Covid-19 considerably slowed down economic activity in the country since April 2021, but Goods and Services Tax (GST) income collection hit a file excessive in the identical month. Citing April GST income collection knowledge, the federal government instructed that enterprise exercise remained strong in April regardless of the second Covid-19 wave.

“Despite the second wave of Covid-19 pandemic affecting several parts of the country, Indian businesses have once again shown remarkable resilience by not only complying with the return filing requirements but also paying their GST dues in a timely manner during the month,” the Ministry of Finance said in a statement.

The GST revenue collection of Rs 1.41 lakh crore in April 2021 was 14 per cent larger than March’s Rs 1.24 lakh crore. Compared to the corresponding month final 12 months, this 12 months’s April GDP collection has been a lot larger.

Many states together with Gujarat, Odisha, Himachal Pradesh, Maharashtra and extra reported the highest-ever GST collection for the reason that oblique tax regime got here into existence in 2017.

The record-high GST income collection in April was a huge achievement for the federal government, particularly as a result of it got here in the center of the second Covid wave in the nation. However, the GST collection in April might not be a signal of financial resilience as claimed by authorities.

MARCH SALES = APRIL GST RECEIPTS

One of a very powerful points that haven’t been talked about by authorities is the truth that the file excessive GST collection in April was a results of the enterprise exercise and gross sales in March.

It could also be famous that the GST income receipts (taxes) for March gross sales have been collected in April, and it doesn’t mirror financial circumstances or enterprise exercise recorded final month.

In March, the state of affairs was not as unhealthy as April, and solely Maharashtra launched some restrictions resulting from rising Covid-19 circumstances. Business exercise was, nonetheless, happening as typical in most elements of the nation in March because the second wave was nonetheless in its preliminary phases; consumption demand was additionally a lot larger in comparability to April.

Read | Demand for non-essential items plummet amid Covid surge, businesses worried

Experts additionally mentioned that GST collections inched to a file excessive in April resulting from strict compliance measures like e-invoicing, knowledge analytics-led investigations and year-end audit and monetary closure of corporations as of March 31, 2021.

Rajat Bose, associate, at Shardul Amarchand Mangaldas & Co. advised Bloomberg Quint that almost all corporations shut their books and lift invoices through the monetary shut on the finish of a monetary 12 months. He listed it as one of many causes behind the “spurt” in GST collections in April.

HIGHER COMMODITY PRICES

Another motive behind file GST income collections in April 2021 was resulting from larger commodity costs. Simply put, GST on items rise when their costs enhance.

The sharp rise in inflation recorded in March is a sign that costs of many commodities went up, together with meals and gas. The retail inflation recorded in March was larger than the earlier three months, confirmed authorities knowledge.

Since GST receipts for April are for precise gross sales and enterprise exercise in March, it is a sign that larger commodity costs have been additionally behind the file excessive GST collection.

Also Read | Why rising inflation, Covid could be a spoilsport in growth recovery

GST COLLECTION LIKELY TO FALL

GST income collections are more likely to dip in May resulting from stringent measures launched by most states in April. According to knowledge, e-way payments generated for the motion of products inside and throughout states have fallen over 30 per cent in April to 4.89 crores from 7.1 crores in March.

According to specialists, the decrease e-way invoice technology in April — that may mirror in May GST collections — is a reflection of provide chain disruptions resulting from stricter restrictions and a slowdown in consumption of non-essential items.

This is more likely to have a destructive affect on financial exercise, and the GST collection in May may fall beneath the Rs 1-lakh mark after seven months. The ultimate affect may very well be a significant decline in GDP, no less than through the first quarter of FY22.

Also Read | Covid-19: 6 factors that could derail India’s economic recovery

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