Explained: What does rise in GST revenue collection indicate?

Current GK ( Master) Indian Economy

02-Oct-21

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Though the revenue growth came on a lower base, the average monthly GST collections in the second quarter have improved, rising 5 per cent as against the average GST collection in the first quarter this year.Gross Goods and Services Tax (GST) revenue collections in September (for sales in August) rose 22.5 per cent year-on-year to Rs 1,17,010 crore. Though the revenue growth came on a lower base, the average monthly GST collections in the second quarter have improved, rising 5 per cent as against the average GST collection in the first quarter this year.
How much are the GST collections?
Gross GST collections came in at Rs 1,17,010 crore in September, 22.5 per cent higher than Rs 95,480 crore collected in the same period last year. Out of the total Rs 1.17 lakh crore collection, CGST is Rs 20,578 crore, SGST is Ra 26,767 crore, IGST is Rs 60,911 crore (including Rs 29,555 crore collected on import of goods) and cess is Rs 8,754 crore (including Rs 623 crore collected on import of goods).
What does it indicate?
The GST collections have picked up pace in the second quarter indicating an improvement in economic activity. The average monthly gross GST collection for the second quarter this year has been Rs 1.15 lakh crore, which is 5 per cent higher than the average monthly collection of Rs 1.10 lakh crore in the first quarter. “This clearly indicates that the economy is recovering at a fast pace. Coupled with economic growth, anti-evasion activities, especially action against fake billers have also been contributing to the enhanced GST collections. It is expected that the positive trend in the revenues will continue and the second half of the year will post higher revenues,” the Finance Ministry said in a statement.GST revenue in September 2020 grew 4 per cent over the revenue of Rs 91,916 crore in September 2019.
Is GST revenue growth a concern?
Though GST revenues are picking up pace after the impact of the Covid-19 pandemic, revenue buoyancy under GST is being seen as a concern, especially after the legally mandated compensation to states for revenue shortfall from the GST implementation comes to an end in June 2022.
In a move towards structural overhaul of the GST regime after its July 2017 rollout, a “review” of the current rate slab structure of GST has been explicitly incorporated in the Terms of Reference (ToR) of the two ministerial panels formed for spelling out a blueprint for GST reforms, as per an order dated September 24. The panel’s brief incorporates an overarching mandate: an evaluation of introducing “special rates” within the tax structure, rationalisation measures that include “a merger of tax rate slabs aimed at simplifying the rate structure”, alongside a review of instances of inverted duty structure and an identification of potential sources of evasion to shore up revenues.
The GST has five key tax slabs: zero, 5 per cent, 12 per cent, 18 per cent and 28 per cent. A compensation cess, ranging between 1 per cent to 290 per cent, is levied on demerit and luxury goods over and above the topmost rate of 28 per cent. A merger of 5 per cent and 12 per cent slabs or 12 per cent and 18 per cent slabs has been deliberated upon earlier as well but has not been taken up formally for a decision.
The Ministry of Finance has constituted a seven-member Group of Ministers (GoM) under Karnataka’s Chief Minister Basavaraj S Bommai for “rate rationalisation” and another eight-member GoM under Maharashtra’s Deputy Chief Minister Ajit Pawar for “GST system reforms”. The GoM on rate rationalisation has been mandated to suggest changes that may be implemented immediately and the roadmap for implementation for the changes that should be implemented in the short and medium term”. The Group will submit an interim report for such immediate measures and will have to submit its report in two months.
Draft e-commerce rules need to be reexamined, and concerns raised must be addressed
Rajiv Kumar, vice chairman, Niti Aayog, has cautioned that the rules “will severely harm ease of doing business and impact small businesses”. The DPIIT has flagged several anomalies. Even the Ministry of Finance has raised red flags.
The draft e-commerce rules released by the Department of Consumer Affairs are facing a significant pushback, with sections of the government raising apprehensions over many of the proposed provisions. As reported in this paper, Rajiv Kumar, vice chairman, Niti Aayog, has cautioned Piyush Goyal, Minister of Consumer Affairs, that the rules “will severely harm ease of doing business and impact small businesses”. Separately, the Department for Promotion of Industry and Internal Trade (DPIIT) has flagged several anomalies, and questioned some of the provisions. Even the Ministry of Finance has raised red flags. Reportedly, the Department of Consumer Affairs is reexamining some of the provisions of the draft e-commerce rules. That is the right approach. It must take into consideration the concerns raised by both industry and sections of the government.Take, for instance, the fallback liability clause. Under the draft rules, e-commerce players are to be held liable in case a seller on their platform “fails to deliver goods or services due to negligent conduct”. However, under the current rules, foreign direct investment is permitted only in “marketplace” models where the e-commerce platforms do not hold inventory, they merely connect buyers and sellers. So if firms have no control over the inventory on their platform, can they be held liable for the sellers? Also under the regulatory scanner are flash sales. But it is unclear how flash sales adversely affect prices, and consumer choice. Moreover, don’t even offline retailers indulge in end-of-season sales? There is also considerable lack of clarity over the rules concerning related parties. This, as Niti Aayog notes, “appears to be a case of overreach.” The rules do not just limit themselves to the welfare of the consumer. For instance, they mandate platforms to provide “fair opportunity” to domestic players. This raises a question: Shouldn’t the consumer protection rules seek to protect only the interest of consumers? As Kumar has said, “the rules go far beyond consumer protection.” They encroach upon areas that can be deemed to fall beyond the jurisdiction of the consumer affairs ministry. For instance, the Ministry of Corporate Affairs has pointed out that there is an overlap between some of the proposed provisions and the Competition Act. Whose jurisdiction will be enforced ? This, as the corporate affairs ministry has pointed out, could lead to “forum shopping”, and thus “divergent rulings”.
The absence of a similarly restrictive regulatory architecture for the traditional brick and mortar stores, and the considerable room for bureaucratic discretion, given the ambiguity in some of the provisions in the draft rules, raise apprehensions over the intent behind the draft e-commerce rules, whether concerns of consumers or other considerations dominated their framing. After all, policy should be guided by the imperative of enhancing consumer welfare, not constricting it.