Domestic transactions helped collection through Goods & Services Tax (GST) to increase about 9 per cent to reach ₹1.87 lakh crore in October, data released by the Finance Ministry on Friday showed.
Collection in data is related to consumption in September which had just 16 auspicious days to make fresh purchase, especially of consumer durables. After September 17, the ‘shradh’ period began during which fresh purchase is usually not made by the majority community.
Although the growth rate in October is higher on a sequential basis compared to September (6.5 per cent), it is the second consecutive month of single-digit growth, indicating some moderation in consumption demand. This also validates moderation in urban demand as observed by Monthly Economic Review (MER), prepared by Economic Affairs Department and released last week. Experts expect some action from GST Council to boost demand especially in urban areas.
Data showed GST from domestic transactions grew 10.6 per cent to ₹1.42 lakh crore while tax on imports rose about 4 per cent to ₹45,096 crore during October. Refunds worth ₹19,306 crore were issued during the month, registering an 18.2 per cent growth over the year-ago period. After adjusting refunds, net GST collection grew 8 per cent at over ₹1.68 lakh crore.
Commenting on the latest number, Saurabh Agarwal, Tax Partner at EY, felt that latest data indicate a potential slowdown in consumer spending in India, which surged in the previous fiscal year. The single-digit growth signals a cooling-off period. “The collections made in this month on account of festive season, particularly the performance of the automobile sector, will be crucial in determining the short-term trend,” he said.
While large States such as Maharashtra, Gujarat, Karnataka and Tamil Nadu have maintained the growth momentum, smaller States, especially in the North East, have recorded a decline.
MS Mani, Partner, Deloitte India, said: “While many large States have recorded an increase above 9 per cent some of them and many of the smaller States have shown a below average increase, which would be an area of concern for those States.”
Festival push
Meanwhile, experts are cautious about remaining months of the current fiscal. Agrawal said that while the festive season is expected to boost collections, the overall outlook for the near future remains cautious. “Despite short-term uncertainties, the long-term prospects for GST collections remain promising due to India’s expanding consumer base and the government’s pro-growth policies,” he said.
Vivek Jalan, Partner at Tax Connect Advisory Services, said the year-to-date net GST collection growth at 9 per cent is much lower than the budgeted GST growth of around 11 per cent, which was aligned more or less to the nominal GDP growth too. Further, standing at 7.9 per cent, the month-to-date GST revenue growth is much lesser. Furthermore, this is a festive month collection.
“This reflects that the economic activity in India needs a push so that the fiscal deficit target can be achieved. As far as GST is concerned, the next GST Council meeting in November/December 2024 should see a lot of action in terms of real estate and rate rationalisation, on which Group of Ministers are now working,” he said.