New Delhi: Government facing severe pressure on revenues due to the Covid disruptions may end the current financial year with a 30 per cent drop in Goods and Service Tax (GST) collections.
This would be a big setback to the Centre that is already burdened with adequately compensating the states for GST related revenue shortfall.
According to the EcoScope report by Motilal Oswal Financial Services, GST collections is expected to come in at Rs 9-9.2 lakh crore range in FY21 as against the budgeted estimate of Rs 13.8 lakh crore.
This comes despite the fact that GST collections stood at Rs 1.05 lakh crore in October, 10.2 per cent higher than the collections in October 2019.
The October collections were also the highest amount of GST collected since February 2020 when the Covid-19 pandemic broke out in India.
With this, the total amount of GST collected during April-October 2020 stood at Rs 5.6 lakh crore, a decline of 20.2 per cent year-on-year (YoY).
Additionally, as against the target of Rs 13.8 lakh crore for FY21, the government has collected Rs 5.6 lakh crore so far, which is 41 per cent of FY21 budget estimate (BE) as against 58 per cent (of FY20 BE) achieved last year by this time.
Within the total GST collected last month, CGST amounted to Rs 19,190 crore, SGST amounted to Rs 25,410 crore and IGST amounted to Rs 52,540 crore.
Moreover, GST collection on imports also rose by 9 per cent YoY to Rs 23,380 crore in October 2020, implying pure domestic collections at Rs 81,780 crore (which saw growth of 10.6 per cent YoY) during the month.
Notably, daily e-way bill generation in October 2020 (up to October 25) was 2 million units, the highest in eight months. This is indicative of sustained pick-up in economic activity, the brokerage said.
Growth in GST revenue in Sept-Oct 2020 (vs the contraction seen in Mar-Aug 2020) implies the trajectory of the economy's recovery, and correspondingly, the government's revenues, Motilal Oswal said.
Since the relaxation given for filing of returns has ended, the 8m GSTR-3B returns filed in October 2020 is for the economic activities conducted only in September 2020.
The report highlighted that the level of returns filed has reached pre-Covid levels.
Overall, another monthly growth in GST collection in October 2020 is definitely welcome. The uncertainty regarding the trajectory of GST collection under normal circumstances - post the nationwide lockdown and compliance related reliefs - seems to have reduced after last month's reading.
"Going ahead, how quickly do the collections revive and make up for the contraction witnessed in the first half of FY21 will be carefully watched," the brokerage report said.