Significance of GST Collection in the Last Phase of the Current Financial Year

Goods and Services Tax (GST) revenue for October 2023 reached Rs 1,72,003 crore, marking the second-highest collection after April 2023. The average monthly GST collection for the fiscal year 2023-24 until October stands at Rs 1.66 lakh crore. 

If this trend continues for the next five months, an additional Rs 8.3 lakh crore is anticipated. To meet or exceed the amended budget target for GST, the total collection needs to surpass Rs 19.92 lakh crore. The positive performance of GST has also impacted direct taxes, with collections reaching Rs.12.37 crore by November 9 in the fiscal year 2023-24, indicating a significant 17.59% increase compared to the previous year. 

Corporate Income Tax grew by 7.13%, while Personal Income Tax witnessed an impressive surge of 28.29%. This growth reflects the effective collaboration between the Boards of Indirect Taxes and Direct Taxes, yielding tangible results.

Current Status of GST Revenue

The financial performance in the first half of the fiscal year indicates a relatively favorable position, despite encountering various challenges. Over the initial six months of FY 2023-24, gross GST tax collections have increased by 16.3% compared to the same period last year.

Customs revenue has notably risen by 25.4% during this period. Nevertheless, there is a deficit in excise duty collections, mainly attributed to the reduction in excise duty on petrol and diesel, along with the decrease in special excise duty on crude oil.

Additionally, the RBI reported a surplus of Rs.87,416 crore, surpassing the budgeted amount of Rs.48,000 crore for the dividend/surplus transfer from the RBI, nationalized banks, and financial institutions.

Rise in GST Revenue & Capital Expenditure

In starting of the half, there was a 10% rise seen in revenue expenditure compared to the same previous year. While spending on debt servicing, defense, and fertilizers has increased, allocations for food and public distribution, transfers to states, agriculture, and school and higher education have decreased.

On the other hand, capital expenditure (capex) has shown robust growth, surging by 48% compared to the previous year. Major areas of capex expenditure include roads, transportation and infrastructure, railways, defense, telecommunications, housing, and urban affairs.

Continued Growth in GST Credit Uptake

The utilization of GST credit continues its upward trend, with a notable 20.4% year-on-year increase, accompanied by a 13.5% year-on-year surge in deposits. Inflation has experienced a decline, reaching a four-month low of 4.9% in October. 

States have earmarked substantial budgets for capital expenditure, suggesting potential positive outcomes; however, the unfolding of these developments will require careful observation. Overall, these trends indicate positive prospects for the economic landscape.

Anticipated Challenges In The Coming Months

The anticipation of future occurrences and the upcoming months of this fiscal year are expected to pose challenges. The fiscal deficit has escalated to Rs.7 lakh crore, reaching 39.3% of the budget estimate. With elections on the horizon, expenditure and the deficit are likely to rise further. On a note, a total subsidy bill of Rs. 2.1 lakh crore was seen in the initial half of FY 2023-24 which is the highest ever in the past four years.

Notably, the limited economic activity observed mainly revolved around Air India and Indigo’s aircraft purchase plans. Disinvestment efforts continue to fall short, achieving only Rs.6,949 crore, which is 13.6% of the budgeted target in the first half of FY 2023-24. 

Moreover, the outlook for the Kharif harvest is not reassuring, and low reservoir levels in major agricultural states are expected to impact Rabi sowing. The growth of the industrial sector, as indicated by the Index of Industrial Production (IIP), has significantly decreased to 5.8% in September compared to 10.8% in August.

Both the manufacturing and electricity sectors have witnessed a substantial sequential slowdown. Additionally, there are indications of a decline in rural demand, with tractor sales contracting for the seventh consecutive month.

Also Read: Modifications In The Indian Income Tax Act: Supreme Court Permits Retroactive Application of Section 153C

Leave a reply