GST revenues have shown a noteworthy 11.3% increase in the first five months of the fiscal year 2023-24, boasting an average monthly collection of ₹1.66 lakh crore, up from approximately ₹1.5 lakh crore in the previous year. This growth was fueled by the exceptional ₹1.87 lakh crore amassed in April, marking an even higher 11.5% surge in the first quarter. However, it’s crucial to note that this rapid ascent has begun to taper off in July and August, slowing down to 10.8% and 10.76%, respectively. These figures represent the slowest rate of increase since July 2021.
August, specifically, recorded a three-month low in revenue at ₹1.59 lakh crore, compared to the three-month high of ₹1.65 lakh crore in July. Breaking it down further, revenues from goods imports rebounded with a 3% increase in August after contracting for two consecutive months, indicating a partial recovery in discretionary demand. Nevertheless, revenues from domestic transactions and services imports only saw a 13.8% growth in August, slightly slower than the 15.1% growth in July. The upcoming festive season might inject some growth from both revenue sources, but the resurgence of high inflation could skew spending patterns, favoring items preferred by high-income households while those with weaker incomes cut back on other expenses.
It’s worth noting that the mandatory e-invoicing for firms with an annual turnover over ₹5 crore is expected to have a positive impact on this month’s revenues, streamlining the tax process. However, the full effects of this change won’t be apparent until two months later. Despite these fluctuations, the overall trajectory of GST revenues remains positive, bolstered by efforts to combat tax evasion and fake registrations. This should alleviate concerns about the initial years of lackluster collections under the GST regime.
Furthermore, this presents an opportune moment to simplify and rationalize the complex multi-rate GST structure, a proposal put forth by the GST Council in 2021. While the Finance Ministry previously indicated that this rate adjustment should wait until inflation subsides, the current scenario suggests that delaying it further would impede growth potential. Skillfully executed tax rate changes could also assist in curbing inflation for essential goods.
In any case, this undertaking will be intricate, necessitating ongoing discussions with the states. Thus, it would be prudent to reconstitute the ministerial group (GoM) tasked with recommending a new rate structure rather than starting the process anew a year later. This approach would ensure a more efficient and coordinated effort to address the complexities of the GST system.