The integrated GST collected on imported goods declined by 0.2 per cent year-on-year (YoY) in September 2023 after rising by a muted 3.5 per cent in August 2023
India’s goods and services (GST) collections need to exceed Rs 1.65 trillion per month during H2FY2024 to meet the budget estimate (BE) for central GST revenues of Rs 8.1 trillion, which appears feasible at the current juncture, the rating agency Icra has said in a report.
Gross GST collections rose to Rs 1.62 trillion in September 2023 from Rs 1.59 trillion in August 2023. Moreover, such collections averaged at Rs 1.62 trillion in Q2 FY2024, slightly lower than that seen in Q1 FY24 (Rs. 1.69 trillion), while substantially exceeding the year-ago levels (Rs 1.47 trillion).
Notably, the integrated GST collected on imported goods declined by 0.2 per cent year-on-year (YoY) in September 2023 after rising by a muted 3.5 per cent in August 2023; such collections have remained muted during H1 FY2024, in sync with the contraction seen in India’s merchandise imports amid the moderation in global commodity prices.
“Going forward, any contraction in the value of merchandise imports may continue to dampen the revenues from IGST, which is levied on an ad-valorem basis. Consequently, IGST settlement to CGST may also be impacted, given the substantial share of IGST on imported goods in total IGST (~48 per cent),” the report added.
The rating agency also stated that the YoY surge in direct taxes coupled with lower tax devolution led to a sharp uptick in net tax revenues in August 2023. The central government’s direct tax collections surged to Rs 1.7 trillion in August 2023 from Rs 0.3 trillion in August 2022, led by a multi-fold increase in personal income tax as well as corporation tax.
Moreover, while tax devolution in August 2023 (Rs. 0.73 trillion) was in line with the previous month, it was lower in YoY terms owing to the release of a double tranche in August 2022 (Rs 1.2 trillion), Icra added.
As a result, net tax revenues rose multi-fold to Rs 2.2 trillion from Rs. 0.3 trillion recorded in August 2022. This pushed up the YoY growth in net tax revenues to 14.8 per cent from April to August 2023, as against a contraction from April to July 2023.
“The GoI needs to release Rs. 6.4 trillion to the states during September-March FY2024 to meet the FY2024 BE (Rs 10.2 trillion), which is similar to the amount devolved during September-March FY2023 (Rs 6.3 trillion). This would aid in containing the incremental fiscal deficit in some of the ensuing months, as seen in August 2023,” it stated.