Gross Goods and Services Tax (GST) revenues hit their second highest monthly tally in October at a little over ₹1.72 lakh crore, breaking a few long- and short-term trends. To start with, they reflect a 13.4% uptick over last year’s kitty, the highest so far in 2023. Moreover, it reverses a persistent deceleration in revenue growth seen through the second quarter of this financial year. From an average growth of 11.5% between April and June, the rise in GST revenues had slowed to 10.6% between July and September, with the last month seeing a 27-month low uptick of 10.2%. The Finance Ministry shall hope that this growth rate pick-up sustains so that its 2023-24 fiscal math gets some buffer from any possible spending or subsidy shocks, whether they arise from external risks such as fuel or urea prices or internal ones such as pre-election goodies like extending the free foodgrains programme. Seen over a broader timeframe, last month’s mid-year indirect tax collections bely a pattern that the highest revenues are received in April as businesses close their books of accounts for the financial year. Year-end compliances had propped up this April’s kitty to a record ₹1.87 lakh crore.
The entire bump up in October’s revenues, stemming from transactions undertaken in September, may not be ascribed to a consumption spike at the onset of the festive season. Experts believe the Revenue Department’s continuing crackdown on the non-compliant, and a September 30 deadline for settling any disputes that may have arisen since the GST regime’s launch in 2017-18, also played a role. However, there is some indication of a recovery in domestic demand. While revenues from domestic transactions and services imports grew 13%, the revenue growth from imports that the Finance Ministry did not explicitly disclose, was sharper at 13.94%. This is not only the fastest uptick in at least nine months but also marks only the third time in seven months that goods import revenues have grown. Some of this must reflect a rebound in discretionary demand, even if this may be largely for premium or high-end goods rather than a broad-based bump. If this sustains through the festive season, revenues could hold up even if companies are reporting some weakening of demand growth in October in consumer goods, especially in rural areas. A new amnesty scheme to settle a limited set of GST demands, unveiled last week for taxpayers who failed to appeal them in time, may also bolster the kitty as it mandates firms to deposit an additional amount of the disputed levy for consideration. Anyone tracking the trajectory of GST as a high-frequency indicator to assess the economy’s growth prospects must not lose sight of such factors.
