The Government of a nation is responsible for the welfare and well-being of the people. To achieve this aim, the government has to spend its resources on various sectors such as infrastructure, health, agriculture, defence, etc. But money can be spent only when it is earned.
The government meets its expenditure with various sources of revenue. Among these sources of revenue, the revenue generated from Goods and Services Tax (GST) collection plays the most vital part in meeting the ever-surging expenditures of the government.
Since the implementation of GST, the ultimate manifesto of the government has been to increase the GST revenue in sync with increased compliance with the law. But the path of generating higher revenue was blocked by the pandemic called COVID-19.
The outburst of the virus was severe and unimaginable. It has brought the vision of development & mission of growth to a stand-still. The nation-wide lockdown paused the economy leading to the projection of negative GDP and delayed progress of the nation.
Downfall in GST revenue was the obvious assumption for F.Y. 2020-21 amidst the nationwide lockdown as major economic activities were stopped. But on the contrary, a different story was waiting to unfold for the last 2 quarters of the year. In the dawn of low collections and recovery for the first half of the year, there was an upward spike in the GST collections from Q-3 onwards which is depicted in the image shown below.
Now let us dive into the major contributors which have provided some stability in the GST revenues during this highly volatile period.
GST revenue figures since October 2020 have been above Rs. 1 lakh-crore mark per month. In March 2021, the monthly GST revenue clocked Rs. 1 lakh crore mark for the sixth time in a row.
This is a positive sign of the recovery of the Indian economy from the ongoing COVID-19 pandemic. This growth is a combination of gradual unlocking of the economy, an increase in economic activity, an increase in consumption demand, and a series of amendments and measures introduced by the government to ensure more adherence to GST Law.
Closer monitoring and strict actions against fake/dummy invoicing, effective tax administration, implementation of e-invoicing, the introduction of QRMP scheme for small taxpayers, focus of increase in E-Way Bill generation, restricting the input on supplies which are not reflected in returns, timely filing of GST returns, all such actions have contributed to the steady improvement in GST compliance, thus leading to surged tax revenue over last few months.
There were efforts made to reduce the already overburdened taxpayers by extension of various due dates, reducing late fees, interest and giving relaxations for various other provisions of law.
Also, the sudden spike in demand for consumer and industrial products created a large ground for new and potential businesses, especially for the E-Commerce sector to enter this ground.
This opportunity was widely accepted by various persons which can be easily understood with the increase in new GST registrations over this period.
The GST revenue during April 2021 aggregated to Rs 1.4 lakh crores which is the highest revenue collected in a month since the introduction of GST. But the question is its feasibility i.e., whether the trend can be sustained in May 2021 and the subsequent period when we are witnessing another threatening wave of COVID-19.
Major contributing states are witnessing another lockdown and restrictions which may hamper the businesses, consumption, demand & supply chains. Another element that may lead to a decline in revenue in coming times is a demand by business houses for exemption and reducing tariff rates on various medical equipment and aids which are required in these alarming situations. Thus, an extension of such relief measures by the government may diminish the hardships of the people but may affect government revenues.
Thus, the path to reach the destination of achieving higher & steady GST revenues cannot be reached from mere 6-month record collections. The major challenge lies in its sustainability over some time.
Aside, higher revenue collections correlate with the greater number of people adhering to the law i.e., by filing returns on time and paying the tax due to the government.
Therefore, constant, and sincere efforts to enact and amend taxpayer-friendly provisions may act as a catalyst for retrieving the economy in its path ahead.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by:
CA Tarun Kapoor
AKGVG & Associates