This fiscal year has seen significant fluctuations in Goods and Services Tax (GST) revenue trends, with record-breaking collections in three out of the first seven months. The fiscal year kicked off with a milestone in April, as GST revenue exceeded the two lakh crore mark for the first time. This rise in revenue can be attributed to annual tax filings, leading to a growth of 12.4% in gross and 15.5% in net collections.
Moments of Peak Collection and Decline
In July, GST revenue exceeded ₹1.82 lakh crore, marking a 10.3% increase and the third-highest monthly collection at the time. October’s revenue also performed robustly, recording the second-highest collection over the past seven years. However, some weaker months have dampened these growth trends. In June, gross revenue growth hit a three-year low at 7.3%, and in September, it dropped to a 40-month low of 6.5%. Nevertheless, October revenue broke the two-month sequential decline and achieved an 8.9% year-on-year increase, suggesting economic resilience. Net revenue grew at 7.9%, doubling the 3.9% growth seen in September, though overall growth has slowed to 9%, down from about 10.2% in August.
Revenue Targets and Government Challenges in Coming Months
To meet budgetary targets, indirect tax revenue will need to accelerate in the coming months, although the risk of a substantial deficit appears mitigated as direct tax and non-tax revenue are performing well. Monthly GST collections are tied to transactions from the prior month, offering early insights into private consumption trends during the festive season. Purchases slowed in September due to the Pitru Paksha period, which impacted GST collections. The Reserve Bank of India (RBI), in its October bulletin, noted that recent GST trends signal a slowdown in the economy, though it expects improvement driven by festive demand.
Consumer Demand and Prospects for the GST Council
In this context, October’s GST collections provide a positive indication, while November’s collections will clarify whether festive demand and consumer sentiment have truly rebounded. Unlike last year, Dussehra and Diwali both fell in October, heightening expectations for increased private consumption. In the automobile sector, sales of high-end SUVs have shown growth, although overall sales growth has remained moderate.
The upcoming GST Council meeting may discuss rationalizing tax rates, including potential reductions on items such as cement and insurance. Such cuts could stimulate higher sales and potentially offset any revenue losses.
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| Ankit Singh "Khadagdhari" |
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