Does the October GST collection number prove with some degree of finality that the economy is back on track, well and truly?
The monthly GST number for October (taxes paid for transactions in September) surprised everyone by not just showing a 10% growth over last year but also breaching the Rs 1 lakh crore mark for the first time since February 2020. Month-on-month also, the October numbers showed a 10% increase.
Experts advise caution as they suggest that the surge in GST collection in October might be a result of a pent-up demand as well as delayed GST payments by businesses which had deferred the payments owing to government.
"The recent GST numbers are in line with improvement we hear from the manufacturing sector but this may not fully reflect the situation in services and thus the overall economy," says Sreejith Balasubramanian, Economist at IDFC AMC.
There is certainly a pick-up in demand for goods as is evident from the number of e-way bill generated in October. According to the latest numbers, e-way bills generated in October increased 21% year-on-year to 6.41 crore. Month-on-month, the increase was 12%.
But could there be other reasons for this jump in GST collections in the October? Chartered accountants and GST experts while aver that the current numbers certainly indicates revival in demand, they also attribute it to a couple of more reasons.
Pritam Mahure, a Pune-based chartered accountant, said that the surge in GST number could be attributed to taxpayers starting to pay GST as the tax relaxations given earlier are now being taken away.
The government had extended dates for return filings for the moths of February to May without late fee. For those delaying beyond those extended dates could file their returns by paying 9% and 18% interest after certain deadlines.
For businesses with turnover of up to Rs 5 crore, the relaxation was extended up to October. Many of those businesses might have filed their returns and paid taxes in October, which they had not done in the earlier months.
Prateek Jain, partner and national leader, indirect taxes, PwC, points to another reason which could also have added to the collections in October. "For GST payers, September is the last month for claiming input tax credits for 2019-20. Therefore, a lot of people do those year-end reconciliations and file their returns. So, this is one reason why in October, you see good collections," he says.
Prateek Jain, however, says that the October GST numbers also shows that the economy showed much more resilience than one had expected.
But can this collection be sustained after the festive season is over? Experts feel that would be the real test if the economic revival is sustainable or not.
Shubhada Rao, an economist and founder, QuatEco Research, says the near term demand has revived, but for this demand to sustain, employment scenario has to get better. "CMIE data is encouraging in this regard, but I will await for a couple of months to ascertain a rising trend," she says.
Sreejith Balasubramanian of IDFC AMC says it would be too soon to call it sustainable, given pent up demand (both by magnitude and by reallocation towards manufacturing from services), and festive season demand now and the risk of any unfortunate rise in domestic infections.
MS Mani, partner, Deloitte India, says if the same GST collections numbers show improvement for couple of more months then one can say that the economy is showing sustainable revival.