This article discusses the ups and downs in India’s Goods and Services Tax (GST) revenue collections during the current financial year. Goods and Services Tax (GST) is an indirect tax system in India that was introduced on July 1, 2017, to replace a complex web of multiple indirect taxes. It is a unified tax applied to the sale, production, and consumption of goods and services throughout India

1. High Revenue Collections in Certain Months: Some months this year have seen record-breaking GST revenue collections. April started the year with a strong showing, with GST revenue surpassing ₹2 lakh crore for the first time. This was partly due to businesses finalizing their tax filings at the end of the previous financial year. July’s collection was also high at over ₹1.82 lakh crore, marking it as the third-highest collection at that time. Recently, October’s collections (before refunds) were the second-highest ever recorded since the GST was implemented about seven years ago.
2. Inconsistent Revenue Growth: Despite these high points, GST revenue growth has been inconsistent. For instance, in June, GST revenue growth was the lowest in three years, at 7.3%. September was even lower, with growth slowing to a 40-month low of 6.5%. In October, growth improved slightly to 8.9%, but the overall growth rate for the year has dropped. As of August, GST revenue growth was around 10.2%, but it has since fallen to 9%.
3. Impact on Government Budget Goals: For the government to reach its budget goals, GST collections (which are indirect taxes) need to grow steadily. However, there isn’t a huge worry about missing budget targets because other types of revenue, like direct taxes (income tax) and non-tax sources, are performing well. The government has also controlled its spending, which helps reduce the pressure to meet budget targets strictly through GST revenue.
4. GST as a Reflection of Spending Patterns: GST is based on consumption, meaning it reflects how much people and businesses are spending. GST revenue in any given month is based on purchases made the previous month. October’s GST collections give an early indication of consumer spending for the festive season, even though part of September saw slower purchases due to a traditional period called Pitru Paksha when some people avoid making big purchases. The Reserve Bank of India (RBI) noted that the recent slowdowns in GST growth could indicate a general slowing of economic activity, but it expects demand to pick up during the festive season due to improved consumer sentiment.
5. Future Revenue and Policy Decisions: October’s strong GST collections are a positive sign, but November’s numbers (which will reflect October’s spending) will provide a clearer picture of how the festive season impacted overall spending. Festivals like Dussehra and Deepavali fell in October this year, unlike last year, which could result in higher spending. Car sales data from October shows that expensive SUVs are selling well, while sales for more affordable cars are moderate, which hints at varied consumer spending patterns.
6. GST Council’s Next Steps: The GST Council, which oversees GST policies, will meet soon to discuss potential changes. One of their key tasks may be adjusting GST rates on certain items like cement and insurance. By lowering GST on these goods, the Council hopes to encourage people to buy more, potentially increasing overall revenue despite the lower tax rate on these items.

In summary, while GST revenue has been high in some months, overall growth has been inconsistent. The government is watching these trends closely, especially during the festive season, as it indicates consumer spending patterns. The upcoming GST Council meeting may lead to tax adjustments to encourage more spending, which could help stabilize GST revenue in the future.\

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Core Correction. Slowdown in Factory Production, The Hindu Editorial Explanation 2nd November 2024.