January 1, 2021 7:27:45 pm
Goods and services tax (GST) collections in December (for November sales) increased 11.6 percent year-on-year to Rs 1.15.174 crore, the highest level since the implementation of the indirect tax regime in July of 2017.
The Finance Ministry said this has been the highest growth in monthly income in the last 21 months. “This has been due to the combined effect of the rapid post-pandemic economic recovery and the national campaign against GST evaders and false invoices along with many recently introduced systemic changes, which have led to better compliance,” he said.
The trend so far
Following the outbreak of the Covid-19 pandemic, GST’s revenue collection had been contracting and was at a lower level than the previous year. GST’s revenue collection remained in negative territory for the first five months of this financial year, with a record collection of Rs 32,172 crore in April, following the lockdown in the country in the wake of the Covid-19 pandemic.
With the opening of the economy and the resumption of economic activities, GST’s revenues started to rebound from September. December marked the fourth month that GST’s revenue collection posted year-on-year growth. The increase in percentage terms is also supported in part by a low base effect.
The reasons for the rebound
GST collections in December (for sales in November) were supported by increased sales of the holiday season due to Diwali in November along with the launch of new electronic invoicing technology systems and action against tax evaders.
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Tax experts noted that the government should provide a breakdown of the GST revenue collected through the filing of returns and recovery campaigns by GST authorities to help assess the true picture of the extent of the economic recovery.
The proposed extension of electronic invoicing to all businesses will further prevent GST revenue leakage.
Under GST laws, electronic invoicing for B2B transactions has been made mandatory for companies with a turnover of more than Rs 500 crore since October 1 last year. It was notified that it will be rolled out to companies with a turnover above Rs 100 million from January 1 this year and it is likely to be rolled out to all companies from April 1.
The electronic invoicing system is connected to a central portal that receives and validates invoices in real time and will eventually replace the electronic invoicing system. It has been seen as a major game changer to curb tax evasion and plug leaks, which in turn may not even require an urgent rollout of the proposed new GST tax reporting system that may have resulted in a fresh start for tax assessors under the indirect tax regime.
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