Steady decline in GST collection Growth Rate

GST collection in the month of October, 2019 (which is based on the economic activity in the month of September) stood at Rs 95380 crore as compared to Rs 100710 crore in the same month previous year.

Source: Ministry of Finance

Since September, the monthly GST collection in 2019 has been lower than the same in 2018. The negative growth of GST collection stood at -5.6% in October, 2019. There has been a steady decline in the growth rate since March, 2019.

Source: Ministry of Finance

If we compare the growth rate with respect to previous month, it is seen that in majority of the months where there is a positive growth , the growth rate in 2019 is less than that of 2018. Likewise, in majority of months when there is a decline in growth rate , the decline is more in 2019 compared to 2018.

Source: Ministry of Finance

September marks the beginning of the festive season and higher economic activity is expected. But what we see is a significant decline in GST collection as compared to the same month previous year. The month on month growth rate as compared to previous month, even though is positive still given that there was a -6.4% growth in the previous month, a mere 3.8% growth is very less.

A decline in GST collection clearly indicates lack of economic activity in the economy implying lesser demand in the economy. We have seen a significant decline in private consumption growth rate and this lack of demand has lead to a significant lower growth of GDP. We have seen a 5% growth in the first quarter of financial year, 2019-20. The trends in GST collection clearly suggests the situation is becoming more alarming.

A lower GST collection also indicates lesser tax revenue for the government. This can lead to two possibilities. One, the government reduces its planned expenditure because of lesser revenue. This will mean that government will not be able to induce more economic activity. Hence the problem will persist. The second possibility is government continues with its planned expenditure irrespective of the lower revenue. This will imply higher fiscal deficit. But there will be some push for the government to increase economic activity.

With the negative growth in the eight core sectors and now the decline in GST collection, more concrete actions are required to boost up the economy. The government has taken some sector specific measures. IPD sincerely hopes that more measures are taken to boost up the economy in the short run.

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