GST revenues have clocked an 11.3% growth in the first five months of 2023-24, with an average monthly kitty of ₹1.66 lakh crore, up from about ₹1.5 lakh crore last year. This uptick, bolstered by the record ₹1.87 lakh crore collected in April, was slightly higher at 11.5% in the first quarter. Over July-August, that growth has slowed to 10.8% and 10.76%, respectively, marking the slowest rise since July 2021. In absolute terms, revenues in August, pertaining to transactions done in July, were at a three-month low of ₹1.59 lakh crore, from a three-month high of ₹1.65 lakh crore in July. On a disaggregated basis, revenues from goods imports rose about 3% in August after two months of contraction, indicating some recovery in discretionary demand. However, revenues from domestic transactions and services imports rose 13.8%, slower than July’s 15.1% growth. The festive season could fuel some growth from both revenue sources. But the resurgence of high inflation may skew the momentum towards items preferred by high-income households as those with weaker incomes grapple with the pronounced price rise across food items by cutting back other spends.
The salutary effect of mandatory e-invoicing for firms with an annual turnover over ₹5 crore, excising loose ends in the tax trail, will be visible in this month’s revenues. But the festive effect would only be discernible two months from now. Yet, the overall trajectory of GST revenues, boosted by a crackdown on evasion and fake registrations, is buoyant and should dilute concerns about underwhelming collections in initial years of the tax. Moreover, it offers a window to simplify and rationalise the complex multiple rate GST structure as mooted by the GST Council in 2021. Last year, the Finance Ministry indicated the rate rejig will have to wait till inflation subsides. This year, it signalled the rationalisation plan will stay in deep freeze, even before the recent price spike. A ministerial group (GoM), tasked with recommending a new rate structure, is yet to be reconstituted. Even if political bandwidth for the big GST reset is limited and the Centre may want to pitch it as a promise to voters for the next Lok Sabha, waiting that long will hurt growth potential. If done deftly, tax rate changes could also aid the battle against inflation in items of interest for the common man. In any case, this will be a complicated exercise so the dialogue with States must be continued by reviving the GoM, rather than starting afresh a year later.
