Recently revenues from the GST hit an all-time high, surpassing the previous month’s record.
Why the revenue was high?
In April 2020, GST collections had dipped to a mere Rs. 32,172 crore due to national wide lockdown which affected all the economic activity.
In October 2020, GST revenues was around Rs. 1.05 lakh crore and since then there was a steady increase with hopes of a sustained recovery.
In April 2021, revenues from the GST was Rs. 1,41,384 crore surpassing the previous month’s record of about Rs. 1.24 lakh crore.
This is essentially driven by the transactions in previous month, due to heightened economic activity.
The rising COVID-19 cases and the fear of an impending lockdown could have driven people to make advance purchases in anticipation.
Moreover, firms in the process of closing annual accounts may have remitted higher GST based on audit advice.
Also gradual tightening of the compliance regime, pro-active co-ordinated probes against taxpayers using fake bills to evade liabilities has also played a significant role.
What are the future prospects?
Now going by the restrictions imposed in several States, supply chain disruptions are not expected to be as challenging.
However, weakening demand will trigger a recalibration of production and investment plans
In 3rd week of April 2021, major two-wheeler producers saw reduced sales when compared to March 2021.
Gradually, plants began to shut down in order to reduce inventory build-ups.
In a report, Crisil has warned of several indicators sliding since mid-April, including GST e-way bills which fell by over 6% for two weeks in a row.
As per IHS Markit, manufacturing orders’ growth hit an eight-month low in April.
The pandemic surge and desperate shortage of health infrastructure have prompted industry leaders to pitch for a stringent lockdown.
Now it is hard to expect GST and other tax revenues to stay robust until government gets a better grip on infections and vaccinations.
What can be done now?
With the Assembly polls over, the Centre must convene the GST Council.
The council should look into rationalisation of GST rate slabs, rearrange the rates on critical pandemic supplies and the address the issue of bringing fuel under GST.
It must begin release the shortfalls in GST compensation to States.
