The rise in GST collection to Rs 1.13 lakh crore in April 2019 is puzzling, given the weak IIP growth and subdued March quarter corporate earnings. Most leading indicators show production and demand conditions have remained weak since the beginning of this calendar.
Is it then safe to look at the GST data as a sign of robustness in the economy? In my view, such a conclusion may be premature.
The 9.2 per cent year-on-year growth in April GST collection is a positive thing, given the backdrop of various rate cuts announced in the Interim Budget to support consumption. But those GST cuts have failed to boost consumption enough, given the recent deceleration in volume growth for several consumer items such as auto and FMCG items.
Possibly, factors relating to financial year-end seasonality explain the rise in GST collection. Average monthly collection of Rs 109,800 crore during March-April 2019 is 12.3 per cent higher than the previous six-month average of Rs 97,800 crore.
If we look back into the previous year, average collections for March-April 2018 stood at Rs 103,500 crore, which was 20.4 per cent higher than the previous six-month average. On a three-month average basis, YoY growth for February-April 2019 actually declined to 8.5 per cent from a peak of 16.8 per cent seen during September-December 2018. The two comparisons above indicate that the rise in April GST collection was actually lower on a seasonally-adjusted basis.
The challenge is that the GST collection target for FY20 is pegged at Rs 13.7 lakh crore, 16.1 per cent higher than last year’s. Overall GST collection in FY19 of Rs 11.77 lakh crore fell short of the target of Rs 13.71 lakh crore by 14 per cent. The Union Government's Interim Budget has accounted for FY20 GST collection of Rs 6.6 lakh crore (excluding GST compensation to states and SGST), which is 19.2 per cent higher than that in the previous year. The actual collection for FY19 came in at Rs 5.5 lakh crore, 15.3 per cent below target.
Thus, the 9.2 per cent growth in April GST collection has nothing much to cheer about. One can hope that as the GST implementation process stabilises and compliance improves, collections will get better than what we have seen so far.
Source :- Economictimes.indiatimes.com