The growth in manufacturing sector activities in last few months and rise in GST collections in October – November 2021 hint at continuing economic recovery in Q3 of the current fiscal. Economic revival is indicated in term of Purchasing Managers Index (PMI), merchandise exports, GST collection, improvement in hiring etc.
The increase in manufacturing activities has a multiplier effect including job creation. Revenue from imports have increased by 43% in November, 2021 which is a good indicator. Increased tax compliances along with enhanced investigations and curbs on tax evasion have contributed to GST tax revenue in November, 2021, which is the second highest since GST was introduced in the country.
While the clouds of new Corona variant ‘omicron’ stares at all of us and the economy, Indian economy has shown impressive performance by growing @ 8.4 percent in Q2 of current fiscal. It has surpassed the pre-Covid level backed by strong consumer demand. Infact, growth in July –October, 2021is the fastest amongst all major economic, including that of China (4.9%). In October, 2021, core sector output growth was 7.5% lead by coal, cement, refinery and natural gas.
High Government investments, recovery in consumption and stable growth in agriculture added to the growth. India can now expect a double digit growth for the full financial year 2021-22. The economy can be considered to be on recovery path with a caveat of Covid alarm owing to new variant a continued vaccination drive with kids coming on the radar can help recovery further.
GST Collections have shown a growing trend in current fiscal 2021-22, particularly in post Covid period. Accordingly to is reply in lock-sabha, government has stated that as on 23.11.2021 Gross Direct Tax collection figures for the FY 2021-22 are at Rs. 815262.7 crore Showing a growth of 48.11% and 18.15% over the Gross collection figures for the corresponding period in FY 2021-22 and FY 2019-20, respectively. The Net Direct Tax Collection figures for the FY- 2021-22 as on 23.11.2021 are at Rs. 692833.6 crores showing a growth of 67.93% and 27.29% over the Net collection figures for the corresponding period FY 2020-21.
Also, the economic impact of the pandemic has led to higher compensation requirement due to lower GST collection and at the same time lower collection of GST compensation cess. GST compensation of Rs. 1,30,464 crore has been released to all States/ UTs to partly meet the compensation payable for the period April’20 to March’21as the amount in GST Compensation Fund was not adequate to meet the full compensation requirement. This issue of shortfall in release in GST compensation was deliberated in 41st & 42nd GST Council meetings and accordingly, Centre had borrowed loan of Rs. 1.1 lakh crore from open market and passed on as back-to-back loan to States/UTs to meet their resource gap due to short release of GST Compensation for FY 2020-21.
As expected GST Collection for November, 2021 have been impressive with gross collection of Rs. 131526 crore, a new second highest since July, 2017 when GST was introduced in India.
The gross GST revenue collected in the month of November 2021 is Rs. 1,31,526 crore of which CGST is Rs. 23,978 crore, SGST is Rs. 31,127 crore, IGST is Rs. 66,815 crore (including Rs. 32,165 crore collected on import of goods) and Cess is Rs. 9,606 crore (including Rs. 653 crore collected on import of goods).
For the second straight month gross GST collection crossed Rs. 1.30 lakh crore. The revenues for the month of November 2021 are 25% higher than the GST revenues in the same month last year and 27% over 2019-20. During the month, revenues from import of goods was 43% higher and the revenues from domestic transaction (including import of services) are 20% higher than the revenues from these sources during the same month last year.
The GST revenues for November 2021 have been the second highest ever since introduction of GST, second only to that in April 2021, which related to year-end revenues and higher than last month’s collection, which also included the impact of returns required to be filed quarterly. This is very much in line with the trend in economic recovery.
It can be said that a large number of initiatives undertaken in the last one year like, enhancement of system capacity, nudging non-filers after last date of filing of returns, auto-population of returns, blocking of e-way bills and passing of input tax credit for non-filers has led to consistent improvement in the filing of returns over the last few months.
CBIC’s outgoing Chairman, Mr. Ajit Kumar has expressed his parting Sentiments- “We are seen not merely as Revenue Collectors but as having a bigger role in the Government’s scheme of citizen centric initiatives and service delivery. We must make good of these opportunities to reach out and interact with citizens/taxpayers, especially youth, to understand what are their expectations from the government and frame our service responses accordingly. If calibrated and done well it could metamorphose our service into a useful tool of governance much beyond tax collection.” The crux of taxation, it should be. The Government has appointed Mr. Vivek Jhori, IRS as new Chairman of CBIC w.e.f. 01.12.2021.
It can only be expected that GST collections will improve further given the GDP growth, rationalization of tax rates and exemptions, widening of tax base, liquidity and festive season / new year ahead. All in all, Q3 of 2021 may end better.
Economy is growing but there is also a sign of concern – private investment and consumption is not growing as expected. The informal sector continues to be in trouble followed by inflation and job related vacuum. India should also keep open the options of sector specific fiscal stimulus and policy changes. It also ought to exercise caution in the wake of new Corona variant and guard its borders and citizens. Forthcoming elections should not spoil the game.
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