India’s biggest tax reform hits ₹1 trillion in October, expects collections to rise with the festive season rolling in

  • The Goods and Services (GST) collection for October crossed ₹1 trillion with 6.7 million businesses filed their GST returns in FY18.

  • The government expects the tax collections to continue rising in the coming months with the onset of the festive season.

  • The southern state of Kerala, in particular, exhibited an extraordinary growth of 44% in GST collection followed by the states of Jharkhand, Rajasthan, Uttarakhand and Maharashtra.

  • The Indian Finance Minister, Arun Jaitley, attributes the success of GST to lower rates, higher compliance, having only one tax and negligible interference by taxation authorities.
India’s biggest indirect tax reform with the implementation of the Goods and Services Tax (GST) only recently completed its first year, and come October, its collections have crossed ₹1 trillion.

While the success of the tax is often debated, October’s collections are a 6.6% higher than that of August. India’s Finance Minister, Arun Jaitley, attributes the success of the tax to reduced incidences of tax evasion and a higher degree of compliance.

In fact, in October, ₹6.7 million businesses filed their GST returns.

The ₹1 trillion threshold was initially breached in April, after which collections have consistently been above ₹900 billion but never quite reaching that mark again. The Indian government expects that this time around tax collections will increase further with the festive season just around the corner.

Aside from Diwali, Christmas and New Year’s, it’s also wedding season when consumer demand typically increases.

The Ministry of Finance also added that the revenue in October pertains to the sales activities for the month of September. In the coming months, the government is hopeful that the increase in demand for consumption will lead to a rise in revenue at an even faster rate. So much so that it’s confident about meeting the fiscal deficit of 3.3% of its Gross Domestic Product (GDP).

State by state

Kerala tops the list of ‘extraordinary growth’ with respect to its GST collection with a 44% contribution to total tax deposits across India. The southern state was followed by Jharkhand, Rajasthan, Uttarakhand and Maharashtra contributing 20%, 14%, 13% and 11% to the total tax collection, respectively.

The total gross GST revenue collection in October constitutes Central GST of ₹164.64 billion, state GST of ₹228.26 billion, IGST of ₹534.19 billion and cess amounting to ₹80 billion .

While the tax regime has yielded positive results for a select few states — Mizoram, Arunachal, Manipur, Nagaland, Sikkim and Andhra Pradesh — others have faced a shortfall in revenue ranging from a mere 3% to a whopping 42% in states like Punjab and Himachal Pradesh.

The GST system in India may have avoided inflation from setting in and widened the tax base, but basic obstacles like registration and compliance are still in play.
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