Festive season will bring in higher GST collections in coming months: Experts
Category: Tax Lawyer
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BACKGROUND
Replacing multiple taxes imposed by the Central and State governments, GST forms a uniform tax structure eliminating cascading taxes. It was first introduced in 2017 as a part of the reforms in India's taxation system, making the process simplified and more transparent. GST collections are one of the primary sources of revenue for the Indian government, reflecting the health of the economy of both domestic consumption and trade.
While the September 2024 GST collections, though slightly subdued considering the fact that it is a reflection of August’s supply chain, stood at Rs 1.73 lakh crore indicating an upward trend.
However, the GST revenues for the coming months of the festive season, the experts say, will be eagerly watched as they are also a proxy for economic growth and can be correlated with the GDP numbers.
KEY ASPECTS
September GST Collections:
While the collections in September 2024, in gross terms, stood at Rs 1.73 lakh crore the total collection in September 2023, was to the tune of Rs 1.62 lakh crore representing a year-on-year growth of 6.5%. This indicates a steady growth in tax revenue.
The large increase in GST refunds, especially for IGST exports, shows that tax authorities are working hard to speed up refunds, and policymakers are making the refund process easier. The slow single-digit growth in GST revenues in many big states is expected to improve in the coming months.
Festive Season and Revenue Expectations:
Experts are hopeful about future GST collections, as they expect a positive boost in the economy in the coming months with the arrival of the festive season. With people spending more during festivals like Diwali, experts predict a significant increase in the revenue in the coming month's collections.
MS Mani a Partner at Deloitte India notes another point of improvement that the rise in GST refunds, particularly for exports, shows the government’s effort to speed up the refunds.
GST Refunds and Government Initiatives:
The reasons behind the government's granting of the GST refunds, which have increased by 31 per cent over the past year, are extremely encouraging as it indicates a positive step toward increasing compliance and encouraging exports.
Further, the ongoing policy reforms and compliance measures and an increase in GST refunds serves as evidence of the government’s commitment to enhancing ease of doing business.
Policy Implications:
The upcoming GST Council meeting in November 2024, Mahesh Jaising, Partner and Leader of Indirect Tax at Deloitte India, highlights that it will be pivotal in further rationalising the tax structure and addressing industry-specific concerns, particularly around trade facilitation.
CONCLUSION
Although the September's GST collections does not show an exponential growth, it provides a firm ground to build on for the coming months. The experts expect a positive growth in GST revenues commencing by October and beyond due to the onset of the festive season coupled with the compliance and policy reforms that the government has in place and will also maintain economic growth and stability for a long time.
The forthcoming GST Council meeting in November will further shape the future trajectory of the tax system, with anticipated measures to enhance both revenue generation and business facilitation.
Additionally, the overall increase in GST refunds demonstrates the government's commitment to timely release funds to support working capital of exporters and industries facing inverted duty structure.
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WRITTEN BY: TEJASRI RAO
GUIDED BY: ADVOCATE ANIK
