The New Year started with a bang for the government as far as its finances are concerned. GST collections in December 2020 showed an unexpected year-on-year growth of 11.6 per cent to Rs 1.15 lakh crore, the highest monthly GST collection so far.
So, what could be the reasons for such jump in collection in December? We talked to number of experts to explain why GST collections in December 2020 showed unexpected jump. Here are some of the reasons:
Festive sales, restocking
One of the obvious explanations for the jump in GST collection could be revival in the economy as lockdown rules were relaxed and daily cases started coming down. Monthly GST collections have been showing higher year-on-year numbers since September 2020, showing revival in the economy.
Festive sales in November and restocking by retailers ahead of Diwali festivities could have also resulted in bumper collection during December. It must be mentioned here that GST on November transactions are collected in December.
"The continued uptick in GST collections would give confidence in the resilience of the economy and indicates that business activities have completely resumed and demand for goods and services continue to be high," says MS Mani, senior director, Deloitte India.
Jump in GST from imports
The government statement says that GST collections due to domestic transactions registered 8 per cent growth while GST from imports rose by 27 per cent. GST from imports in December 2020 was Rs 27,050 crore, almost Rs 6,000 crore more than GST on imports (Rs 21,295 crore) in December 2019.
So what explains the jump in GST in imports when imports have been declining? MS Mani, Senior Director, Deloitte India, says that the increase in the GST collections on imports indicates that international trade is coming back to normal - however the sector-wise import data would throw light on the linkages of the imported goods with domestic manufacturing and exports.
But the import data tells a different story. The merchandise imports declined 13.33 per cent in November 2020. In fact, merchandise imports during April-November 2020 period showed a decline of 33.56 per cent.
"Importers were facing issues due to faceless assessment in past few months, etc, and it is possible that after many representations to the government those issues were resolved and goods stuck at the ports got clearance for entry into India," says Rajat Bose, partner in law firm Shardul Amarchand Mangaldas. GST is levied when importers take delivery of the goods.
Increased anti-evasion vigilance
Some experts also attribute this growth to the heightened vigilance by revenue department against evasion. The government has been going after non-filers and fake billers with a vengeance for past few months.
In October and November 2020, 1.63 lakh registrations were cancelled due to non-filing of GSTR-3B returns for more than six months. Besides, Directorate General of GST Intelligence (DGGI) and CGST Commissionerates arrested 164 fraudsters, including five chartered accountants and a woman in a nationwide drive over a month. They also filed 1,768 cases against 5,745 GSTIN entities.
Pratik Jain, Partner and Leader Indirect Tax, PwC India, says that the reason for this growth could be tightening of compliances with measures such as e-invoicing and increased investigations to catch tax evaders even though GST audits for 2017-18 and 2018-19 are yet to start in a big way. "Steady increase in number of GST returns (GSTR 3B) filed is encouraging, which is 87 lakh in December 2020 against around 81 lakh in December 2019," says Jain of PwC.
Rajat Bose of Shardul Amarchand Mangaldas says that the government should provide a breakup of the GST collected through filing of returns and GST collected through recovery drives initiated by the Department of Revenue Intelligence and DGGSTI authorities, which would give us a better picture of the extent of economic recovery.
He says that these recovery drives alone could have resulted in Rs 10,000-15,000 crore additional collection in December.