Amid the economic slowdown, the Indian Government is a little relief as the Goods and Services Tax (GST) collection of December 2019 has reached above ₹1 trillion. After having a prolonged contraction, the government has achieved to maintain GST collections that exceed the ₹1 trillion figure for the second consecutive months in December 2019. Some analysts claimed that this development would be a crucial help for the decision-makers to address some of the existing financial problems and boost overall India’s economy.
GST as a Huge Source of Government’s Revenue
India’s Gross Domestic Products (GDP) growth has declined substantively in September 2019 with a record low of 4.5% in a six and a half years’ time because of the slowing domestic and external demand. Following a slight relaxation of the economic contraction after September, the government had able to collect above ₹1 trillion GST in a row in the next two months.
The central government and state government together collected GST around ₹1.03 trillion alone in December 2019 which was a 9% increase of the tax collected in a year ago. According to the Indian finance ministry report, “CGST (Central GST) collection amounted to ₹19,962 crore while SGST (State GST) and IGST (Integrated GST) were recorded at ₹26,792 crore and ₹48,099 crore respectively. Meanwhile, the cess for the month of December stood at ₹8,331 crore.”
As Livemint reported, the expansion of GST collection was due to the improvement of industries’ performances including key sectors such as auto sales, non-oil merchandise exports, and factory output. According to the Indian finance ministry, “The GST revenues during the month of December 2019 from domestic transactions have shown an impressive growth of 16% over the revenue during the month of December 2018.”
The ministry further added, “If we consider IGST (integrated GST) collected from imports, the total revenue during December 2019 has increased by 9% in comparison to the revenue during December 2018. During this month, the IGST on import of goods has seen a negative growth of (-) 10% but is an improvement over (-) 13% last month and (-) 20% in the month of October.”
States’ Performance and Rearranging GST Plan in 2020
The initial period after the unveiling of GST in India was not successful. The revenue-deficit for the initial period was because of the immature policy which allowed flexible tax cuts and exemptions to several industries. Moreover, under the original plan of GST, the policy of tax relaxation on consumer goods made the situation worse since many businesses had to pay more taxes on raw materials than on finished products.
The rapid decline of GST revenue became a major issue in Centre-state relations over the last months. Many of the Indian states had been pressurizing the central government to release payment of GST and making several complaints about delaying the payment. As the economic contraction got to loosen up over recent months, it has brought a provisional solution to the existing issues between the central and state government.
Some of the states achieved an impressive performance in the tax collection. For December 2019, among major states of India, Assam recorded 33% increase of GST collection, followed by Maharashtra (22%), Tamil Nadu (19%), Gujarat (18%), Delhi (18%), Kerala (17%), West Bengal (16%), and Madhya Pradesh (16%). While the under-performers states include Jharkhand (-3%), Odisha (2%), Goa (6%), and Rajasthan (10%).
On December 18, 2019, the GST council held a meeting in which many officials offered suggestions on the restructuring of the existing tax plans. In the meeting, the GST council decided not to raise the tax schemes due to prevailing India’s economic slowdown. As reported by Livemint, the central and state government will discuss the restructuring GST rates which is likely to be begun in the early months of 2020.
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