E-way bills generated by businesses for inter-state commerce in May were marginally down from April, but significantly higher than the year-ago month, suggesting that June GST collections will likely be around Rs 1.35 trillion, sources said.
E-way bills stood at 73.62 million in May 2022, the third highest since the system was rolled out in 2018 and up 84% on year, partly because of a very low base. However, on a month-on-month basis, e-way bills in May were 2% lower than the previous month.
Collections had hit an all-time high of Rs 1.68 trillion in April (March transactions), broadly reflecting efficient plugging of tax evasion, a sustained shift of business to the formal sector of the economy and year-end bunching of tax payments by firms.
Monthly gross GST collections moderated to Rs 1.41 trillion in May, reflecting a 4% decline in e-way bills in April.
A continued momentum in GST receipts from July 2021 onwards yielded average gross GST mop-up of Rs 1.23 trillion in FY22, up 29% on year. Officials reckon that monthly GST revenues may average at Rs 1.35 trillion in FY23 as against an average of Rs 1.2 trillion factored in the Budget. Continued buoyancy in GST collections for several months in a row would help allay the state governments’ concerns about a revenue shock they might have to deal with once five-year revenue protection ends on June 30.
Given that an incipient pick-up in consumption has resulted in a more-than-proportionate jump in GST revenues, a stronger economic recovery could allow the collections to settle at an elevated level, proving the high revenue productivity of the broad-based consumption tax. The rise in monthly gross GST collections have given some breathing space to the GST Council to recalibrate an action plan on tax rates, as the shortfall in GST by states after end of compensation mechanism will not be that high, officials reckon.
Under the GST compensation mechanism, which is constitutionally guaranteed, state governments are assured 14% annual revenue growth for the first five years after the tax’s July 2017 launch.