Goods and services tax (GST) collections by the central and state governments fell 5.3% year-on-year to ₹95,380 crores in October, but saw a 3.8% improvement over September collections, the finance ministry said.

According to the finance ministry statement, GST collections in September were at ₹91,916 crores, while in October 2018 the government had mopped up ₹1 trillion in consumption taxes. The year-on-year decline in GST receipts reflects the demand slowdown in the Indian economy.

Government data released on Thursday showed that output of eight core infrastructure industries accounting for two-fifths of India’s factory output, had contracted by 5.2% in September—the slowest pace in at least 14 years.

Muted GST revenue collections are set to put more pressure on central government finances, which is already showing sluggish growth.

According to the Controller General of Accounts (CGA) data, in the first half of the fiscal year, the central government collected ₹6 trillion in tax revenue, accounting for only 36.8% of the full-year target. Besides, the fiscal stimulus provided by the Centre through the reduction of corporate tax rates for companies not availing any tax break and for new manufacturers is estimated to cost the exchequer ₹1.45 trillion.

These fiscal pressures could get reflected in the recommendations of the Fifteenth Finance Commission, which is expected later this month, regarding the sharing of the central government’s tax revenue with the states for the five years starting April 2020.

The Fifteenth Finance Commission, which made a presentation to state finance ministers at the GST Council meeting in September, was of the view that the tax base has come down because of successive rounds of GST rate cuts.

Experts said festive demand could help in propping up revenue receipts in the coming weeks.

“With possibly a general demand slowdown in September, the GST collections were comparatively lower than expectations. With festivities in October, these numbers should witness a rise and meet expectations in the coming month," said Abhishek Jain, tax partner, EY.

The finance ministry statement said that 7.38 million businesses had filed the summary tax returns for September in October, which is slightly below 7.59 million filed for the previous month.

After settling the tax receipts for interstate supplies, the total revenue earned by the central government and states stood at ₹38,224 crores and ₹37,645 crores, respectively, in October.

Pratik Jain, partner and leader, indirect tax, PwC India, said revenue collections should be better in November given the festivals in October. “With the simplification of compliance requirements and tightening of administrative measures, the collection could slightly improve in the next few months, but there is definitely a need for stimulus to spur demand," he added.

Source: LiveMint