After clocking record collections in December, the Goods and Service Tax (GST) revenue is expected to cross Rs 1.20 lakh crore in January 2021, indicating that government's ongoing efforts are bearing fruit.
GST collections will be in the range of Rs 1.21-1.23 lakh crore and may still have an upside, says Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.
Monthly GST collections have been showing higher year-on-year numbers since September 2020, indicating revival in the economy. It touched a record high of Rs 1.15 lakh crore, which was the highest ever collections since the implementation of the countrywide tax in July 2017. The previously record high of Rs 1,13,866 crore was reported in the month of April 2019.
"The Government's ongoing efforts are bearing fruit in the form of GST collections. After clocking record collections in December 2020 month (Rs 1.15 lakh crore), our internal simulation model indicates that January 2021 GST collections will be in the range of Rs 1.21-1.23 lakh crore and may still have an upside. The positive trend which started from September 2020 has sustained and gained momentum," according to SBI research report 'Ecowrap'.
Considering the highest ever January numbers, if 50 per cent of the Integrated GST (IGST) collection is disbursed to states by March 21, then state GST shortfall can narrow down to only a minimal Rs 11,000 crore after taking into account the full compensation cess, the report noted.
If the central government keeps 60 per cent of the IGST revenue, then the states could be staring at a shortfall of around Rs 67,000 crore, it added.
The SGST (state GST) collection for states was 12 per cent lower at Rs 1.87 lakh crore in April-December 2020, as compared to the same period previous year, while the allocated IGST was 13 per cent lower at Rs 1.26 lakh crore. Meanwhile the cess collection stood at Rs 60,312 crore, which was 17 per cent lower than last year. The combined amount of SGST, allocated IGST and cess stands at Rs 3.73 lakh crore, which was 13 per cent lower than last year's collection in the same period and it was equal to 58 per cent of the states' budgeted SGST which stood at Rs 6.49 lakh crore.
As per the report, the government has already borrowed Rs 11.46 lakh crore (as on January 22, 2021) this fiscal and the remaining gross borrowing of Rs 1.6 lakh crore is expected as per the calendar, thereby taking the total gross borrowing to Rs 13.03 lakh crore, lower than Rs 13.10 lakh crore earlier.
Meanwhile, the government surplus cash balances have increased significantly recently. The number has increased to Rs 3.34 lakh crore as on January 28, 2021 compared to Rs 1.08 lakh crore in September 2020, which indicates that the government is collecting huge amount of tax revenues which it is not able to spend.
"This in turn means that the government will have to borrow less next year than our earlier anticipated gross borrowing of Rs 11.5 lakh crore. Thus, the market perception of upward pressure on bond yield due to increased borrowing next fiscal or even this fiscal is not correct," it said.
The SBI report suggested that the surplus cash balances can well be used to finance a sizeable portion of fiscal deficit in FY22 to keep interest rate increase in check and fasten the pace of recovery further.
As per the report, the other option is to also use a portion of cash balances to spend and pay back all outstanding dues of FY21, like outstanding SME payments from government departments, pending GST bills which in itself will usher in a big fiscal push in FY22. "Clearly, we could be in for a goldilocks period. The question is can we go for the jugular?" it said.