Signalling a sustained uptick in economic activity, the goods and services tax (GST) e-way bill generation recovered to a six month high in September with markets gearing up for a packed festive season as Covid-19 cases continue to fall. This brightens prospects of a further pick up in GST mop up in the coming months, with economists estimating collections to touch Rs 1.3 lakh crore mark over the coming months.
According to the data by the GST Network (GSTN)-the IT backbone of the unified indirect tax regime-6.79 crore e-way bills were generated on its portal in September, compared to 6.58 crore in August. E-way bill generation number in September is the second highest in a month since the launch in February 2018. It is behind 7.12 crore touched in March 2021, before the second Covid-19 wave disrupted economic activity.
The average daily e-way bill generation in September posted a growth of 6.6 per cent over August and stood at 22.6 lakh per day. The generation in August stood at an average of 21.2 lakh per day, and 20.6 lakh in July.
E-way bills are compulsory for the movement of all consignments worth more than Rs 50,000, hence, is an early indicator of trends in demand and supply in the economy. This reflects in macroeconomic indicators with a lag.
The sustained revival in e-way bill generation in September is expected to show up in the GST collection numbers for October, providing more room for spending to the Centre in order to fuel economic recovery. The GST collection numbers for October would largely capture transactions or supplies made in October.
The economy had started showing signs of recovery in September last year after the impact of national lockdown in the first quarter wore off, but suffered a hit in April this year due to the second Covid-19 wave, which resulted in localised lockdowns across the country. Barring June 2021, the GST collections have been exceeding the Rs 1 lakh crore mark since October 2020 and Rs 1.1 lakh crore since January this year.
Madan Sabnavis, chief economist, CARE Ratings argues that the September e-way generation is high as restrictions on movement of goods and services reduced substantially. "Things will get better from here. We can expect GST collections to improve in coming months as spending increased," he said.
"Economic indicators like tax collections and generation of e-way bills are instilling confidence that the Indian economy is jumping back into growth trajectory. The festive season coupled with new year preparations would lead to rising merchant transactions paving the way for higher tax collections in the last quarter of 2021," said Rajat Mohan, senior partner, AMRG Associates.
Similarly, MS Mani, partner, Deloitte India points out that the outlook for GST collections for the coming months should be very positive, based on the collection trends exceeding an average of Rs 1.1 lac crore per month, witnessed in the past few months. "While the collections reflect the revival in both the goods and services sectors, the e-way bill generation data reflects only the movement of goods, which are subject to seasonal variations," he said.
Although other economic indicators, such as trade, indicated significant improvement, power consumption and auto sales during the month remained subdued.
India's exports in September posted a 21.35 per cent growth to $33.44 billion buoyed by the performance of key sectors like engineering goods and petroleum products, according to government data. In September, merchandise imports grew by 84.75 per cent to $56.38 billion, year-on-year, indicating an uptick in demand in the economy.
However, India's power consumption saw a subdued growth of 1.83 per cent in September to 114.49 billion units (BU).
The Centre is in a comfortable revenue position so far with net direct tax collections up by 74.4 per cent up to September 22, to Rs 5.7 trillion compared to Rs 3.27 trillion in the same period last year. In fact, Centre's fiscal deficit as percentage of the budget target narrowed to its lowest in 18 years in the April to August period in 2021-22.
The better than expected revenue collections, ramp-up in Covid-19 vaccinations, healthy advance estimates of kharif (summer) crop, and higher government spending have resulted in GDP forecast upgrades by some agencies. ICRA, for instance, revised up its 2021-22 real GDP growth estimate for India to 9 per cent from its earlier 8.5 per cent.
Aditi Nayar, Chief Economist, ICRA said the average e-way bill generation numbers are quite encouraging in light of the challenges being faced in some sectors such as automobiles. "We expect pre-festive season stocking and an attempt to ship out stock early to avoid logistical delays before the Christmas season to boost this metric further in October 2021. Accordingly, GST collections are expected to rise sequentially over the next two months to around Rs 1.2-1.3 lakh crore each," Nayar said.
Copyright©2021 Living Media India Limited. For reprint rights: Syndications Today