Informist, Tuesday, Jul 2, 2024

By Priyasmita Dutta

NEW DELHI – Monday marked the seventh anniversary of the goods and services tax regime. This time, Jul 1, designated as GST Day, was a particularly low-key affair without the customary press conference. This was probably because the finance ministry is under quarantine, with senior officials busy preparing the Budget. Meanwhile, the government quietly skipped the release of the monthly data on GST collection for June.

The government held back the release of data which was hitherto released religiously on the first of each month, after much to and fro and several rounds of discussion during the day, finance ministry officials said. Although the Goods and Service Tax Network shared the data with the finance ministry, the order to withhold the release came from the top. The ambiguous reason for it has left even many ministry officials confused.

Sources aware of the development said that the decision was based on feedback that highlighting robust GST collections, which scaled record highs in April at 2.10 trln rupees, had caused resentment over excessive taxation. In all likelihood, the official data release has been discontinued for good.

"It is just a data point that says something--sometimes positive and sometimes negative. Currently, collections are robust, but there may be a case of some negative feedback on the constant boasting of tax collections by the government as it impacts consumers," a finance ministry official told Informist. "There has been representation from a few states as well that the GST regime has benefitted the Centre more than states," the official said.

Discontinuing the release of the data would mean that there will be no easy way to keep track of the monthly GST collected by each state unless the states release them individually. Informist reported on Monday, citing a government official, that the government collected 1.74 trln rupees from GST in June. The official said that from the integrated GST collections, the government settled 396 bln rupees for the Central GST and 335 bln rupees for the state GST in June.

From this information, coupled with the month-end data released by the Controller General of Accounts which details the net CGST collections for the month, one can extrapolate the total SGST collection. "It should broadly indicate the total SGST collection but will still not be fully accurate because of refunds and rounding off," the official said.

FEEDBACK FIASCO

On the negative feedback the government may have received, a finance ministry official said that taxes on day-to-day products like packed milk, wheat, grains, are particularly a pain point for consumers. Besides, the record-high collection figures that the government speaks about also have an inflation factor, the official said. Usually, growth in GST collections is a component of two macroeconomic factors--inflation and nominal GDP, the official added.

Though headline inflation has moderated in the last few months, the outlook on food inflation continues to complicate the scenario. Headline inflation fell to a one-year low of 4.75% in May thanks to a record low core inflation of 3.1%, even as food inflation stayed high at 8.7%.

Tax experts, however, were split on why the finance ministry did not make the GST data public. "The discontinuation of the monthly GST collection sharing by the government may be attributed to several factors indicating the maturity and stabilisation of the GST system. From the government's perspective, the regular release of detailed monthly GST collection data may no longer be necessary, as the collections appear to be stabilising," Ankur Gupta, practice leader-indirect tax at SW India, said.

Since its inception, growth in GST collections have come a long way. The initial few years were erratic as systems were still new and efficiency was not at its best and soon after that, the COVID-19 pandemic happened, leaving the entire economy crippled. The collections dropped sharply but 2022-23 (Apr-Mar) and 2023-24 saw a massive recovery in economic momentum and consumption at large.

In 2022-23, monthly GST collections averaged 1.51 trln rupees, and in 2023-24, they averaged 1.68 trln rupees.

Though there was a departure from the usual drill with June's data, Sakshi Gupta, principal economist at HDFC Bank, said that all of this is currently a conjecture and one cannot be sure if this will be continued henceforth. "We will have to see what they have to say in the next few months."

JUST JUNE?

Besides the feedback that the government likely received, the data for June was also a bit confusing. Though the GST collections in June are the fourth highest in absolute terms, the growth of 8.1% is the lowest since June 2021, when the Indian economy was struggling under the second wave of the COVID-19 pandemic.

The slowdown in growth in GST collections in June is surprising given that e-way bill generation in May pointed to buoyant growth. The number of e-way bills generated jumped 17.0% year-on-year to 103.16 mln in May, according to data from the Goods and Services Tax Network. The number of e-way bills generated in May was the second-highest ever, a touch below March's all-time high of 103.55 mln.

An e-way bill is a GST document for transport of goods worth more than 50,000 rupees within or outside a state. As such, the number of e-way bills generated is taken as a lead indicator of economic activity and domestic trade. In May, the GST mop-up was 1.73 trln rupees.

"June collections reflect some economic activity of the previous month, so there could have been some possible slowdown in economic activity during the election month or maybe because of weather-related factors. You cannot also see very high year-on-year growth every financial year," Sakshi Gupta said.

"As the system matures, and collections stabilise, yearly growth will slow down and settle at a point. We will have to wait and watch for a few months' reading to see if this is normalisation of stabilisation of GST collections. Perhaps this is an early indicator of that," she said.

"Sustaining an on-year growth rate of 8%-10% would also demonstrate stable revenues, providing an opportunity to focus on rate rationalisation and further simplification of compliance procedures," Ankur Gupta said. The Interim Budget has projected the Centre's share in GST collections to rise 11.6% in 2024-25. The total GST collections, excluding cess, are roughly divided equally between the Centre and the states.

WAY FORWARD

Whatever the government's reasons may be, not releasing detailed GST numbers will throttle transparency, if it becomes a regular practice, another tax expert said, requesting anonymity. "GST is a very high-frequency, real time indicator that gives the picture of the economy and not giving a detailed release on it is not appreciated," the expert said. "State-wise GST data is also indicative of the region-based, monthly economic conditions. There are not many ways to check it without GST data."

The expert also said that the government may choose not to draw attention to its coffers as the newly elected National Democratic Alliance may want to win back voters after it came back to power with a sharply reduced margin. "A celebration of high consumption based tax collection will not get them votes," the expert said.

In the elections, the Bharatiya Janata Party's tally came down to 240 seats from 303 in 2019, while the number of seats of the ruling coalition fell to 292 seats from 353 seats in the previous elections. The majority mark is 272 seats.

The finance ministry official said that the government may also discontinue releasing the net direct tax collection data that the Central Board of Direct Taxes releases on the 10th of each month. "The government will likely make a departure from sharing too many releases on the tax that it is collecting," the official said.

GST is not the only data that has gone missing. In the recent past, the government has stopped releasing data including rail freight and tourist arrivals, regularly.

It will now be time to wait and see how the government deals with data going forward. This development also ironically comes at a time when Finance Minister Nirmala Sitharaman has been saying that the current government works on the tenets of transparency and accountability. End

Edited by Ashish Shirke

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