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GST Collections improved during July-December’2020, but still lower than estimates

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The Centre’s GST collections increased during July-December’2020 coinciding with unlock phases across the country. The collections during these six months were slightly more than the collections during the same period in 2019-20. However, the overall collections are still lower than the original estimates.

A January 2021 press release of the Ministry of Finance stated that the Gross GST collections for December’2020 were around Rs. 1.15 lakh crores.  This was not only 12% higher than the GST collection for the same month last year i.e., December’2019 but also the highest collection since the implementation of GST, overtaking the earlier highest in April’2019. 

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The increase in GST collection is a positive indicator and provides the government with much-needed revenue in the wake of an economy affected by the COVID-19 pandemic. 

In an earlier story, we reported that the Gross GST collections during the first quarter of 2020-21 i.e. April-June’2020 fell by around 58% compared to the collections during the same period in 2019-20. This was understandable since there was a nation-wide lockdown during most of that quarter and multiple sectors were affected by the lockdown. 

Over the ensuing months, things started to open up during the various unlock phases. We take a look at the GST collections in the ensuing two quarters i.e., the six-month period of July-December’2020, and analyse the trends both at the national level & in individual states.

Gross GST collections during July-December’2020 on par with 2019-20 collections 

Gross GST collection includes CGST, SGST, IGST (Inclusive of GST on Import of Goods) & Cess (including on import of Goods). The overall GST collection during July-December’2020 was Rs. 5,94,643 crores, a slight increase of Rs. 388 crores compared to the same six-month period of 2019-20.

The individual monthly trends over these two quarters indicate that, after a shortfall during July & August ‘2020 compared to the same months in 2019-20, the gross GST collections were higher month-month in each of the next four months, from September to December compared to 2019-20.  

Although the collection of November’2020 showed a slight decline, the GST collection bounced back to the highest ever in a month during December’2020, as already highlighted earlier. 

Early signs of increase in GST collection with varying trends across the States 

As the data indicates, compared to the first quarter of 2020-21 which was directly impacted by the COVID-19 induced lockdown, the ensuing two quarters have shown a comparable improving trend in GST collections.

Few of the states that have managed to earn higher GST collection during July-Decmber’2020 compared to the same period of 2019-20, have shown early signs of recovery i.e., during the second quarter (July-Septmber’20), and continue to report higher month-on-month GST revenues compared to 2019-20. Other states that have reported a decrease in GST collections during this six-month period also reported an increase in GST collection albeit at a later period i.e., during the third quarter of 2020-21 (Oct-December’20). 

An increase in GST collection during December’2020 has been a consistent trend observed across most of the States/UTs. However, in its press release, the Ministry of Finance highlights that the increase in GST revenue in December could be due to a combined effect of – rapid growth, nation-wide drive against GST evaders & fake bills, along with systemic changes that have contributed towards improved compliance.  Hence, the highest GST collection in December’2020 may not be necessarily just due to an upturn in the economy. 

12 States reported decreased GST collection in July to December of 2020-21 compared to 2019-20

In an earlier analysis for the period March-June’2020, it was observed that the GST collection of 27 States/UTs fell by more than a quarter compared to that of the same period in 2019-20. Only 4 States/UTs have managed to increase their collection during that compared to 2019-20. 

The situation has improved across many states during the ensuing 6 months i.e., July-December of 2020. Among the States, 18 states have reported higher GST collections during July-December’2020 compared to the same period in 2019-20. On the other hand, 12 states have reported decreased collections compared to 2019-20. Even in these 12 states, the situation has improved with the least comparative collection being reported from Goa, where the collection during these 6 months of 2020-21 was only 81% of the collection compared to the same period in 2019-20. For the sake of uniformity in comparison, Jammu & Kashmir is being considered as a State for the analysis, and the collection made in Ladakh during 2020 is included in J&K. 

However, the trend is different in the case of the Union Territories. Only Dadra & Nagar Haveli has reported an increase compared to 2019-20, while the GST collection for the rest of UTs has decreased compared to 2019-20. Daman & Diu reported only 30% of GST collection in 2020-21 compared to 2019-20. It may be noted that an increase in Dadra & Nagar Haveli and the decrease for Daman & Diu could be due to the merger of these two UTs since the combined GST collection of both the UTs does show an increase.

Maharashtra, Karnataka, Delhi & Telangana among the major GST earning states that have reported a fall in 2020-21 

From the above analysis, it can be observed that while the overall GST collection across the country has improved during July-December’2020 managing to match the 2019-20 levels, the trend is not uniform across the states. 

The impact is more visible in few of the larger states that traditionally reported higher GST collection. 

  • Maharashtra, which has the highest GST collection in the country has reported a fall during July-December’2020 compared to 2019-20. The fall in the collection is to the extent of Rs. 3.6 thousand crores. The month-on-month trend, however, indicates that the situation has improved by December’2020 when higher GST collection was reported compared to December’2019. 
  • A similar trend is observed in Karnataka, Telangana & Kerala where an improvement is observed in the latter half of July-December’2020, especially in December’2020. 
  • The same cannot be said about NCT-Delhi, which has reported a fall in revenue by 13% compared to that of last year. A month-on-month comparison shows lower GST collections in each month of 2020-21 compared to the corresponding month in 2019-20, all through July-December’2020.

A common trend observed in all these states is the fall in GST collection in November 2020, sandwiched between the increased collection during October 2020 & December 2020.

In most of the States with increased GST collection, the increasing trend was observed as early as August’2020 

The major states that have reported an increase in their overall GST revenue during July-December’2020 compared to the same period in 2019-20 include – Gujarat, Tamil Nadu, U.P, West Bengal, Rajasthan, Odisha, M.P, A.P, Chhattisgarh, Jharkhand, Punjab, etc. 

  • Among these states – Gujarat, Tamil Nadu, U.P, West Bengal, Rajasthan, Jharkhand & Punjab have all reported less than 70% of 2019-20 GST collection during the March-June’2020 period, as highlighted in the earlier story. There is a considerable improvement in these states during the six-month period of July-December’2020. 
  • A significant trend in these states with increased GST collection during these 6 months in 2020-21, compared to that of 2019-20, is the early shift in the trend. Most of these states have started to report higher month-on-month GST numbers compared to 2019-20 as early as August/September ’2020, whereas such an increase in other larger states was only visible in October’2020 as mentioned earlier. 

The GST collections still way below the estimates

The increasing trend in most states could be due to the initiatives to cut down on fraud and improve compliance. This is also a positive sign which paves way for more stable growth in GST collections in the future. 

However, the budget estimates for 2021-22 indicate that the government is being pragmatic and does not anticipate collections to increase to the level of what was estimated in the 2020-21 budget. The revised estimates of the Centre’s GST collection for 2020-21 was reduced to Rs. 5.15 lakh crores compared to the budget estimates of Rs. 6.9 lakh crores. The revised estimates are almost 25% less than the budget estimates. 

The budget estimates for 2021-22 pegs the centre’s GST at Rs. 6.3 lakh crores, almost 10% less than budget estimates for 2020-21 of Rs. 6.9 lakh crores. The lower estimates hint that the centre is expecting lower GST revenues even compared to its expectations at the beginning of 2020-21 despite the recent increase in collections. 

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