GST collection over 1 lakh crore for 4 months in a row

The GST collection numbers for the month of February was announced a couple of days back. This is based on the economic activity in the month of January.

Source: Government of India

The GST collection for the month of September and October , 2019 was less than the same in the previous years. But ever since the cap on input tax credit was announced there has been a increase in GST collection.One reason for the increase in GST collection is the step taken by government to cap the input tax credit to 20% to control for revenue leakage. This was announced in October.

Source: Government of India

There was around 8.3% growth in GST collection in Feb, 2020, as compared to the same month previous year. This is significantly less than growth of 13.1% as of Feb, 2019. The growth numbers of January, 2020 also has been significantly less than that of the last year. So while GST growth which showed a downward trend since Mar, 2019 to Oct, 2019, witnessed a rise in growth rate since Nov, 2019, the growth rate has been much less as compared to the growth rate in the same month previous year.

Source: Government of India

The GST collection growth with respect to the previous month has been less in 2019-20 as compared to 2018-19 for almost all the months when growth rate for both the years has been positive and also when both declined the decline has been more severe in 2019-20. But then there are exceptions. November, 2018-19 saw a negative growth in GST collection while the same number in the next year has shown a significant increase as against the month of October. The decline in December in 2018-19 has been higher than the decline in Dec, 2019-20. But the general trend is again visible in Jan, 2020. The growth rate with respect to previous month for the month of Feb has been very similar for both 2019-20 and 2018-19.

GST revenue collection reflects the economic activity and a increase in that is indicative of a rise in demand in the economy. However as have mentioned earlier with the cap on input tax credit to 20% to control for revenue leakage was announced in the month of October. The rise in GST collection happened only after that. So this increase in GST collection might not be indicative of a rise in demand in the economy but may be purely because more efficiency in terms of reducing revenue leakage. Once concern is in spite that measure to stop the leakage the growth rate in GST (as compared to same month previous year) has been lower in Jan and Feb, 2020 has been lower the growth numbers for the same months in 2019. It is to be seen how the trend continues in the months to come.

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