Seven years of the GST regime

Udayan Hazarika

(The writer can be reached at udayanhazarika@hotmail.com)

This year happens to be the seventh year of the introduction of the Goods and Services Tax (GST). The concept of GST was first introduced by the Kelkar Committee on indirect taxes in the year 2000. The matter was thereafter discussed at various levels and at various quarters, and finally, the empowered committee of the State Finance Ministers, after a thorough discussion, designed the roadmap, which was published in the form of a discussion paper in 2009. Thereafter, the Constitution Amendment Bill was introduced in the Lok Sabha in 2011. However, the bill could not be passed due to the emergence of issues regarding the payment of compensation to the states. The matter was taken up with the States, and finally, after long deliberations between the Central and State Governments, the Constitution 122nd Amendment Bill 2014 was introduced in the Lok Sabha in December 2014, which was passed in June 2015. The bill finally received the assent of the President on September 8th, 2016 as the 101st Constitution Amendment Act of 2016. The Act finally came into force in 2017.

The performance of the Act, as per available data pertaining to the last four years, reveals that tax collection is gradually improving. In the year 2020–21, total collection was to the tune of Rs 11.37 lakh crore. In the next year (2021–22), there was an increment of 30.43 percent, with a total collection of Rs 14.83 lakh crore. In the year 2022–23, the collection further increased to Rs 18.08 lakh crore, with a growth rate of 22 percent. Although the rate of growth was further slowed down to 11.61 percent in the years 2023–24, in absolute terms, the collection in fact further rose to Rs 20.18 lakh crore. Similarly, in terms of average growth per month, the collection is also gradually increasing. In 2020–21, the average monthly GST collection was Rs 0.94 lakh crore, which increased to Rs 1.23 lakh crore in 2021–22. The amount further increased to Rs 1.50 lakh crore in 2022–23 and then to Rs 1.68 lakh crore in 2023–24.

The collection of goods and service taxes (GST) is recently in the news.  The collection of such types of taxes is usually influenced by various socio-economic factors like festivals, vacations, the prevalence of seasonal contagious diseases, the beginning and ending of the financial year, etc., resulting in large-scale fluctuations in the size of their collections. The current year (2024–25) was opened with a huge collection of GST revenue, which the Finance Ministry termed “record high,” with the gross collection reaching Rs 2.10 lakh crore for the month of April/24 while the net collection comes to Rs 1.92 lakh crore, which gives a growth of 15.5 percent over the collections made during the same period last year. The next item that is in the news is the collection of GST in the month of June 24. The collection dipped suddenly this month to a three-year’ low, recording Rs 1.74 lakh crore. This gives a growth of 12.4 percent over the GST collected in April last year. 

The interim budget of India (2024–25) estimated the total collection of GST revenue with the cess component at Rs 10.68 lakh crore, as against last year’s revised estimate of Rs 9.57 lakh crore. As against this, the collection in the year 2023–24 was remarkable, with Rs 20.18 lakh crore compared to the actual collection of Rs 8.49 lakh crore for the year 2022–23, which is above 137.69 percent year over year. On the other hand, the collection in May 2024, although slowed down to the level of Rs 1.73 lakh crore, compared to that of April 2024, registered a growth of about 10 percent. Of this amount, CGST is accounted for at Rs 32,409 crore, SGST is at Rs 40,265 crore, IGST is at Rs 87,781 crore, and cess is to the tune of Rs 12,284 crore. Although the collection in June/24 was marginally higher than the collection in May/24, i.e., Rs 1.74 lakh crore (with a growth rate of only 0.73 percent), year-over-year growth was 8.07 percent. In June 2022, the collection was to the tune of Rs 1.45 lakh crore with y-o-y growth of 56.25 percent, and between July 22 and July 23, the growth rate was 11.03 percent. Thus, the June 24 growth rate was three years’ low. For the first quarter (Q1) of this fiscal, the collection of revenue in terms of GST comes to Rs 5.57 lakh crore.

The fact that the collection in June was the lowest in three years is merely a metaphor. We will analyse the tax collection trend for the years 2023–24 to understand the volume of tax collected month- and quarter-wise. For the year 2023–24, the total collection of GST as mentioned was Rs 20.18 lakh crore, of which CGST was Rs 3,75,710 crore, SGST was 4,71,195 crore, IGST was Rs 10,26,790 crore (which also includes import duty realized from imported goods), and cess was to the tune of Rs 1,44,554 crore (which also includes Rs 11,994 crore collected from imported goods). The volume of Q1 FY24 was Rs 5.05 lakh crore, as against Rs 4.53 lakh crore for the same period of the previous year. The growth rate was to the tune of 11.60 percent.  In the second quarter, however, there was a fall in collection compared to the first quarter. But on a year-over-y basis, there was an increment, which in percentage terms came to 10.58 percent, and in absolute terms, it was Rs 4.87 lakh crore as against Rs 4.40 lakh crore of the last year. The Q3 FY24 registered a collection of Rs 5.05 lakh crore as against the last year’s amount of Rs 4.47 lakh crore. The growth rate in this quarter is 12.91, which is the highest for that year. In the fourth and final quarter, in which usually the highest tax collection takes place, total collection recorded was Rs 5.21 lakh crore, as against the previous year’s collection of 4.67 lakh crore. Thus, in a situation where normal trading and business take place unhampered by any internal or external forces, tax collection in the first and fourth quarters remains highest, and usually the second quarter collection gets slowed down.

This slowdown in the second quarter begins in the final month of the first quarter, so it’s not surprising if the collection in June of this year declines slightly. It will pick up quickly. The government has stopped publishing the tax-collection data, as is done on the 1st of June every month. The government has not disclosed the reasons for this decision. But the non-publication of the tax collection data will be a big blow to the researchers and the business community in general.