India’s Goods and Services Tax (GST) collection rose in June 2024, but at a much slower pace compared to recent times. At Rs 1.74 lakh crore, it represents a 7.7% year-on-year increase, marking the slowest growth rate in three years. This slowdown has analysts scratching their heads and the government discontinuing its usual monthly release of GST data adds another layer of intrigue.
A Cause for Concern?
While Rs 1.74 lakh crore is a substantial collection by any measure, the significant dip in growth compared to previous highs (April 2023’s record Rs 1.87 lakh crore) is a cause for some concern. Experts point to a few possible reasons:
- Reduced Economic Activity: Elections can lead to temporary disruptions in economic activity, and June 2024 coinciding with elections might have resulted in a slowdown impacting GST collection. This is a common trend observed in historical data, and analysts will be looking for signs of a rebound in the coming months as economic activity normalizes.
- Plateauing of Trends: After a period of consistent growth, GST collection might be reaching a temporary plateau. This could be due to various factors, such as saturation in certain sectors or limitations of the current tax base. The government might need to consider further policy initiatives to reignite momentum, such as bringing more products and services under the GST umbrella or streamlining compliance procedures for businesses.
- Base Effect: It’s important to consider the base effect when analyzing year-on-year growth rates. If the GST collection in June 2023 was particularly strong, a smaller increase in June 2024 would still result in a seemingly significant slowdown in percentage terms. Examining the data over a longer period and factoring in the base effect will provide a more nuanced understanding of the true growth trajectory.
Positive Signs
Despite the slowdown, there are positive takeaways. The four-month streak of collections exceeding Rs 1.5 lakh crore indicates a robust domestic consumption sector. Additionally, the government’s efforts to improve compliance, like waiving annual return filing for smaller businesses, could lead to a more sustainable collection pattern in the long run.
The government’s decision to stop the monthly release of GST data has raised some eyebrows. Transparency is crucial for maintaining investor confidence, and some analysts believe a shift to a quarterly or bi-annual reporting system might be more suitable.
The coming months will be crucial in understanding the reasons behind the slowdown and the government’s plans to address it. While the current situation might be a temporary blip, close monitoring and strategic policy interventions will be essential to ensure GST continues to be a strong pillar of India’s indirect tax regim
