Strong indirect tax collections work well for government finances, especially at a time when the economy is facing global headwinds. (AI image)
NEW DELHI: GST collections grew 8.7% to Rs 2,42,702 crore in April, an all-time high, but was driven by a 26% surge in the mop-up from imports, which were estimated at Rs 57,580 crore.Based on transactions in March, for which taxes were paid in April, latest official data pegged GST collections from domestic transactions at Rs 1,85,122 crore, an increase of 4.3% over April 25. Within this, state GST mop-up was 3.1% higher at Rs 61,331 crore, while the central collections were over 7% higher at Rs 52,140 crore. With rates lowered on several goods and services, collection growth has slowed down.
The muted growth may be on account of the disruption caused by West Asia conflict, which resulted in supply problems for many industries, especially those dependent on gas. In fact, gas shortage forced several fertiliser units to advance maintenance, while units in Morbi and several other parts of the country were forced to stop production. Besides, there was a shortage of petrochemicals and other raw materials, which also may be reflecting in slower growth in industrial output in March.In contrast, higher commodity prices may have resulted in higher collections from imports.Pratik Jain, partner at consulting firm Price Waterhouse & Co, added that the slower growth in collections from domestic transactions could indicate some softness in consumption — possibly reflecting a moderation in discretionary spending, amid ongoing geopolitical uncertainties.“While the headline numbers are encouraging, the divergence between modest domestic GST growth and the significant uptick in import-linked collections warrant a strategic pivot. In an increasingly dynamic global landscape, we must critically re-examine our policy frameworks to further incentivise domestic manufacturing,” said Saurabh Agrawal, tax partner at EY India, a consulting firm.In April, refunds rose over 19% to Rs 31,793 crore, resulting in net collections growing 7.3% to Rs 2.1 lakh crore. “Although these collections relate to transactions in March 26, which was normal year-end reporting of maximum transactions, several large manufacturing and consuming states have reported low single-digit (state GST collection) growth, including Gujarat at 3% and Maharashtra, Karnataka and Haryana at 5% — this requires deeper sectoral analysis,” said MS Mani, partner at Deloitte India.
