The impact of the novel coronavirus outbreak has been felt in the collection of the Goods and Services Tax (GST) for February, with the government collecting Rs 98,000 crore so far (till March 30, 2020), sources said.
The collections are likely to remain around Rs 1 lakh crore and will be significantly short of the Rs 1.25 lakh crore the government had targetted in light of an uptick in economic activity that was being seen, sources added.
Last year, GST collections for the month of February stood at roughly Rs 97,000 crore.
However, even as the window to file GST collections for February, March and April has now been extended to June 30, 2020, government sources say that almost all the collections for the month of February, which were to be recorded in March have almost come in. This leaves not enough scope for the government to reach the internal estimates of Rs 1.25 lakh crore, government sources added.
Government officials say that the reduced GST collections are primarily because of the fact that imports had started reducing from China from the middle of January and remained almost negligible in the entire month of February.
The reduction in imports led to a decline in IGST collections, which pulled the number lower.
"Not just this, some of the other factors leading to a reduced collection are the slow-paced manufacturing activity in the automobile sector because of the transition from BS IV vehicles to BS VI since the manufacturers were wanting to first exhaust their existing stocks," said government officials.
"Besides, the poor economic sentiment and low GDP growth were already leading to a slowing economy. Considering that the GST is a consumption-based tax, all these factors were leading to a reduced consumption having a direct impact on the GST collections," officials added.
Meanwhile, the tax department feels that the February GST collections are still quite healthy as compared to the ones which are expected for the month of March and April considering that almost a major part of both the months are severely impacted because of COVID-19 outbreak in India and the subsequent lockdown implemented to tackle it.
Meanwhile, to ease the pain of micro small and medium enterprises, the indirect tax department is ensuring that it processes the stuck refunds to the extent possible after proper verification, to avoid any claims getting credited in these trying times.
Tax experts, however, said that at Rs 98,000 crore, the February numbers are still encouraging and the government should rework its estimates noting the current economic hardships.
"The GST collections not witnessing a significant dip this Month is encouraging specifically with the numbers expected to reduce in coming months including collections in April," Abhishek Jain, Tax Partner at EY, said.
"With most businesses being non-operational for a considerable period in March and the relaxation of delayed payments being allowed, the collections in the coming quarter would see quite a fall," Jain added.
Industrial activity in February especially in sectors such as auto and real estate remained muted, MS Mani, tax partner at Deloitte India said. "This, accompanied by a slowdown in imports over the past few months, could lead to a lower-than-expected collection in GST. The budgeted collections were kept much higher than the average monthly collections during the year."
"The GST collections over the past few months have been in the range of Rs 1 lakh crore per month and the collections reported for March would hopefully continue that trend," Mani added.
"Economic slowdown is the key reason for low collections. Also, certain sectors such as auto and auto components etc are bleeding, which is adding to the problem of low tax collections,"Anita Rastogi, Partner - Indirect Taxes, PwC India, said.
