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Government faces shortfall in GST collection
February, 06th 2019

GST collection reached ?1 lakh crore only in two months out of nine in the current financial year, according to government data.

One of the months where the revenue crossed ?1 lakh crore was October, which marks the beginning of the festive season. Hence, a higher collection was expected. The other month was April. However, a government release in April cautiously noted that this "cannot be taken as trend for the future" as people usually pay arrears of the previous months in March/April.

The chart below shows the GST collection trend in this financial year.

According to a CARE ratings report published on January 2019, the government has already exceeded its fiscal deficit target, with the deficit reaching 114.8% of the budgeted amount during April-November 2018. The report also states that the monthly GST collections during Apr-Dec ’18 amounted to ?8.7 lakh crores, which implies that the Central government and the States will have to collect ?3.85 lakh crores in the remaining three months in order to meet the budgetary target of ?12.6 lakh crore.

With the exception of Andhra Pradesh, Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim, all other States have experienced a shortfall in GST collection according to the data published by the government.

The government has taken several measures to increase revenue collected through GST, such as the introduction of an e-way bill, measures for simplification of tax return filing, increasing the tax base and rationalisation of tax rates to improve tax compliance and collection.

Tax officials have been appointed to check for overuse of input tax credit, as the current system of GST allows a time gap between input tax credit claim and realisation of tax, providing leeway for more input tax credit being claimed through fake invoices. The introduction of the new filing system is said to aid the tax department in matching invoices and real time tax paid.

Further, it is important to note that tax collection may undergo volatility due to the recent tax cuts imposed by the government in December on 17 items and six services.

The recent increase in the threshold of tax payment for MSMEs to a turnover of ?1.5 crore or more against the previous threshold of 1 crore, according to the government, will bring down compliance cost whilst leading to a revenue loss of around ?5,500 crore.

The impact of the various cuts and relaxations can only be gauged once tax revenue from the last three months of the financial year is realised.

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