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Economy: GST — Higher compliance, not-so-high revenues
Publish date: July 3, 2018
The GST tax base broadened in May, though the collections remained behind the FY 2019 asking rate.
While the total GST collection in May stood at Rs 956 billion — an increase of Rs 16 billion from the previous month — it was Rs 20 billion below the government’s expectations.
May’s, along with the previous months, relative underperformance means that the GST collections will have to register Rs 1,065 billion in the next three months in order to reach the fiscal target.
Reasons for increased GST tax base
The GST tax base has likely to have improved due to the introduction of the interstate e-way bill. The e-way bill is now generated when goods worth above Rs 50,000 are transported from one state to the other.
We had earlier noted how the e-way bill could help in strengthening the GST compliance infrastructure. This is because while the Integrated GST collection has improved, State and Central GST figures have remained muted. However, we are awaiting the June/July reports to get a clearer picture.
Solution to rev up GST collections
Since the collections remain behind the curve, we believe the government will have to open its purse strings even if it fails to meet its revenue target. Lower collections is another reason why we estimate the government’s GFD/GDP to remain unchanged at 3.5% instead of the budgeted 3.3%.
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