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Growth in India’s GST Revenues Reaches 10-Month High in October
Growth in India’s gross Goods and Services Tax (GST) revenues bounced back in October with tax collections rising at a 10-month high pace of 13.4% to hit the second highest monthly tally of ₹1.72 lakh crore.
October’s GST receipts were 5.7% over the kitty in September, when growth in the indirect tax had slowed to a 27-month low of 10.2%. The 13.4% revenue growth marks the sharpest year-on-year uptick since December 2022 and breaks a three-month streak of deceleration.
Domestic transactions and services imports yielded a 13% uptick in October’s revenues. The Finance Ministry did not disclose the revenue growth from goods imports. Back of the envelope calculations by The Hindu indicate that GST levies on imports of goods rose 13.9% in October, which is faster than the growth from domestic transactions and the highest uptick in at least 9 months. Revenues from goods imports have contracted in four of the last seven months, including September.
GST Compensation Cess collections, which include ₹1,294 crore levied on goods imports, hit a record high of ₹12,456 crore in October. The previous highest collection of the cess levy that will persist till at least March 2026 was ₹12,025 crore received in April.
The Ministry did not share the revenue growth trends among States and union territories that is usually part of its monthly GST revenue statement, in the communique issued on Wednesday.
Instead, State GST revenue trends for the first seven months of 2023-24 were shared, including the amounts States were credited from collections of the Integrated GST (IGST). Following such IGST settlements, State GST revenues were up 12% between April and October 2023, with just two States reporting negative growth — Manipur (-19%) and Himachal Pradesh (-2%).
“The average gross monthly GST collection in the FY 2023-24 now stands at ₹1.66 lakh crore and is 11% more than that in the same period in the previous financial year,” the Ministry said.
Deadline effect
Experts believe October’s GST kitty, stemming largely from transactions that took place in September, got a fillip from some festive spending as well as compliance deadlines and steps to curb evasion.
“One of the reasons for this rise is the time barring period for financial year 2017-18. Moreover, the spate of notices and anti-evasion drive have led to substantial collections,” said Parag Mehta, partner, indirect tax at N.A. Shah Associates.
ICRA chief economist Aditi Nayar said the “higher than anticipated” collections would have got a leg-up from quarter-end adjustments as well as the overall momentum in the economy.
KPMG indirect tax head and partner Abhishek Jain also linked the significantly increased collection to settlement of disputes for 2017-18 as the normal period of limitation was ending on September 30. “A mid-year collection of such a high number is definitely worth a cheer and the ongoing festivities driven consumption could help this continue,” he reckoned.
Last month’s GST revenues included Central GST (CGST) of ₹30,062 crore, ₹38,171 crore of State GST, and ₹91,315 crore of IGST. “The government has settled ₹42,873 crore to CGST and ₹36,614 crore to SGST from IGST. The total revenue of Centre and the States in the month of October 2023 after regular settlement is ₹72,934 crore for CGST and ₹ 74,785 crore for SGST.
Significance of India’s GST Revenues Growth
The growth in India’s gross Goods and Services Tax (GST) revenues reaching a 10-month high in October is a positive indicator for the country’s economy. A 13.4% increase in tax collections signifies a strong rebound and breaks a three-month streak of deceleration. This growth indicates increased economic activity, both in domestic transactions and services imports.
Features of October’s GST Revenues
- October’s GST revenues reached a second-highest monthly tally of ₹1.72 lakh crore.
- GST levies on imports of goods rose 13.9% in October, faster than the growth from domestic transactions.
- GST Compensation Cess collections, including levies on goods imports, hit a record high of ₹12,456 crore.
Objectives of Goods and Services Tax (GST)
The Goods and Services Tax (GST) system in India was introduced to simplify the indirect tax structure and create a unified tax regime across the country. The main objectives of GST are:
- To eliminate cascading taxes and reduce the multiplicity of taxes.
- To create a seamless national market for goods and services.
- To promote ease of doing business and improve the competitiveness of Indian businesses.
- To improve tax compliance and increase tax revenues for the government.
Effects of October’s GST Revenues Growth
The growth in GST revenues has positive effects on the Indian economy:
- Increased tax collections provide more funds for the government to invest in infrastructure development, welfare programs, and other public services.
- Improved revenue collection indicates higher economic activity and consumer spending.
- Strengthened tax compliance helps in curbing tax evasion and promoting a fairer tax system.
Pros and Cons of GST Revenues Growth
Pros:
- Boosts government revenue and fiscal stability.
- Encourages economic growth and development.
- Fosters a transparent and simplified tax system.
Cons:
- Possible burden on small businesses due to compliance requirements.
- Impact on prices of goods and services, which may affect consumers.
- Challenges in administering and implementing GST across diverse sectors and regions.
Fun Fact
October’s GST revenues saw an uptick in part due to festive spending and compliance deadlines. This reflects how cultural celebrations and legal requirements can influence economic activities and revenue growth.
Mutiple Choice Questions
1. What was the growth rate of India’s gross Goods and Services Tax (GST) revenues in October?
a) 10.2%
b) 13.4%
c) 27%
d) 5.7%
Explanation: The growth rate of India’s gross Goods and Services Tax (GST) revenues in October was 13.4%, as mentioned in the article.
2. When did growth in India’s GST revenues bounce back?
a) September
b) October
c) November
d) December
Explanation: Growth in India’s GST revenues bounced back in October, according to the article.
3. What was the growth in October’s GST receipts compared to September?
a) 5.7%
b) 10.2%
c) 27%
d) 13.4%
Explanation: October’s GST receipts were 5.7% over the kitty in September, as mentioned in the article.
4. What was the uptick in October’s revenues from domestic transactions and services imports?
a) 10.2%
b) 13.9%
c) 5.7%
d) 13%
Explanation: October’s revenues from domestic transactions and services imports yielded a 13% uptick, as mentioned in the article.
5. What were the GST levies on imports of goods in October?
a) 13.4%
b) 13%
c) 13.9%
d) 10.2%
Explanation: GST levies on imports of goods rose 13.9% in October, which is faster than the growth from domestic transactions, as mentioned in the article.
6. What was the highest collection of the GST Compensation Cess in October?
a) ₹1,294 crore
b) ₹12,025 crore
c) ₹12,456 crore
d) ₹1.72 lakh crore
Explanation: The highest collection of the GST Compensation Cess in October was ₹12,456 crore, as mentioned in the article.
7. How much were State GST revenues up between April and October 2023?
a) 2%
b) 19%
c) 12%
d) -2%
Explanation: State GST revenues were up 12% between April and October 2023, as mentioned in the article.
8. What is the average gross monthly GST collection in the FY 2023-24?
a) ₹1.66 lakh crore
b) ₹1.72 lakh crore
c) ₹1,294 crore
d) ₹12,025 crore
Explanation: The average gross monthly GST collection in the FY 2023-24 now stands at ₹1.66 lakh crore, as mentioned in the article.
9. What were the reasons for the rise in October’s GST collection?
a) Festive spending and compliance deadlines
b) Economic momentum and settlement of disputes
c) Anti-evasion drive and time barring period
d) All of the above
Explanation: The rise in October’s GST collection was due to festive spending, compliance deadlines, and steps to curb evasion, as mentioned in the article.
10. How much was the Central GST (CGST) in October?
a) ₹30,062 crore
b) ₹38,171 crore
c) ₹91,315 crore
d) ₹72,934 crore
Explanation: The Central GST (CGST) in October was ₹30,062 crore, as mentioned in the article.
Brief Summary | UPSC – IAS
In October, India’s gross Goods and Services Tax (GST) revenues rebounded, increasing by 13.4% to reach ₹1.72 lakh crore, the second-highest monthly tally in 10 months. This growth comes after a slower period in September, when GST revenues only saw a 10.2% increase. The 13.4% growth is the sharpest year-on-year increase since December 2022, breaking a three-month streak of deceleration. The majority of the growth came from domestic transactions and services imports, with GST levies on imports of goods rising by 13.9%. GST Compensation Cess collections also hit a record high of ₹12,456 crore in October.