The State Bank of India (SBI) has recently released an Ecowrap report titled “The Arithmetic of GST Collections”, according to which the Goods and Services Tax (GST) revenue collection for 2018-19 may increase at a rate of 14 to 16 percent, which will bring the average decadal growth rate of indirect taxes close to 14 percent.
Chief Economist Soumya Kanti Ghosh also noted in the report that the theoretical revenue target of Rs 7.4 lakh crore is way more than the 2017-18 financial year’s revised estimates (RE).
“The target for GST is pegged at Rs 7.4 lakh crore that is 67 percent higher than FY18 RE. However, under the new GST regime, the last date for filing of GST returns is 20th of the succeeding month, even on the last day of the financial year.”
Since the GST tax regime was launched in July last year, the current fiscal will only count for 9 months. Also, the Integrated GST (IGST) is expected to be shared between states and the Centre equally, so the actual GST collection rate for FY 2019 (for 9 months period) comes to 15.8 percent.
Ghosh said in a statement, “If we take 8 months’ estimate, the growth rate further reduces to 13.5 percent. Thus, the GST collections growth rate for FY19 comes to around 14-16 percent, that is similar to the decadal gross tax revenue growth rate at 13.9 percent. There have been several speculations in the public domain that the GST collections in current fiscal and budget estimates for FY19 are overtly aggressive, but these are flawed.”
Ghosh has also clarified the speculations around the sharing (or non-sharing) of the IGST between states and the Centre by saying that around 60 percent of the revenue generated from IGST collections has been transferred to states. In FY18, the total IGST revenue is Rs 4.01 lakh crore, out of which 2.4 lakh crore has been distributed to states and Rs 1.61 lakh crore has been recorded as FY18 revised estimates.
“However, IGST collections of Rs 4.01 lakh crore should be equally split between the Centre and states. If that happens, then the extra 10 percent will get transferred to the Centre leading to the upward revision of FY18 estimates,” Ghosh added.
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SBI report said, “It seems that the revenue targets of the government for FY19 are reasonable,” the report concluded. “The bank is confident that the gross tax revenue of India will grow by 16.1 percent in FY19 to reach Rs 19.1 lakh crore, which includes an estimated “10.2 percent growth in corporation tax and 20.4 percent rise in personal income tax”.
