The Centre has blamed the cyclical slowdown in sectors such as automobile and widespread rainfall during August for the low Goods and Services Tax (GST) collections in September.

It has also denied the allegations made by Kerala’s Finance Minister Thomas Isaaac on GST compliance.

GST collections in September were ₹91,916 crore, which was the lowest after ₹85,962 crore collected in February 2018. Since GST is a destination-based tax, the current downtrend in consumption is said to have impacted collections. The mop-up is also below the Budget Estimate of about ₹1-lakh crore.

According to sources, lower revenue in September can be attributed to the cyclical slowdown in certain key sectors such as automobile, which is a major contributor to the GST revenues. Passenger vehicles saw over 31 per cent decline in August. Even in September, sales of passenger vehicles registered a decline of 14-56 per cent. Another factor for low collection was widespread rainfall during August in various parts of the country, according to an official. This includes major economic centres such as Mumbai, where economic activity was disrupted as well as movement of goods impacted for a significant number of days.

“Overall cyclical economic slowdown during the recent months has also had its negative impact on GST revenue as it is primarily a tax on consumption,” another source said. It may be noted that even during the period May-August 2019, when the GST revenues witnessed a less-than-expected growth of 5 per cent, the tax on domestic inter and intra-State supplies has seen a growth of 9 per cent which has been pulled down by a decline in growth at the rate of (-) 4 per cent in GST on imports.

Response to Kerala FM

Meanwhile, a tweet by Kerala’s Finance Minister Thomas Isaaac has not gone well with the Centre and also with some of the States. On Wednesday, Issac tweeted: “Record low GST collection is not only a reflection of economic slowdown but also the mess in GST administration. What compliance can you expect when even first annual return is yet to be filed? And also rates have been continuously slashed to less than revenue neutral levels.”

In a response to the tweet, Sushil Kumar Modi, Deputy Chief Minister of Bihar, said low GST collection is not because of slashing of rates but cyclical slowdown in auto and some other sectors. “Most rate cuts were in 2018 but from November 18 to March 19 growth of revenue was 14 per cent. Kerala party to every rate cut,” he said.

Sources here said since both Centre and States have pooled their sovereignty related with indirect taxation (barring Customs and Central Excise Duty/Sales tax related matter on non-GST items) in the GST Council, States are equal partners in administration of the tax. If fact, due to the micro level presence and reach of the tax officers of the State Government, States have a greater role in ensuring proper compliance in GST. This may range from educating taxpayers in ensuring compliance to routine checks like checking e-Way bills and follow up for return filing, right up to undertaking coercive action like conducting searches and seizures.

“In all these activities, States share an equal responsibility along with the Centre and most of the States are making all the efforts to ensure compliance within their jurisdiction,” a source said.

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