Festive Effect: GST Mop-Up Grows 9% To Rs 1.87 Lakh Crore In October

India's Goods and Services Tax collections grew 8.9% to Rs 1.87 lakh crore in October, on account of festive season. The October collection witness six month high after a muted growth in monthly collections in recent months.

The September particularly had the lowest growth at 6.5% since the pandemic outbreak. Experts see this single digit growth "a cooling off period".

"Recent GST collections indicate a potential slowdown in consumer spending in India, which surged in the previous fiscal year. The single-digit growth signals a cooling-off period," said Saurabh Agarwal, a tax partner at EY India.

The collections made in this month on account of festive season, particularly the performance of the automobile sector, will be crucial in determining the short-term trend. While the festive season is expected to boost collections, the overall outlook for the near future remains cautious, Agarwal underlined.

The October number, however, continues to maintain Rs 1.7 lakh crore mark for the eighth consecutive month, according to the provisional data released by GST department on Friday.

In the second quarter of the ongoing fiscal, the average monthly GST receipts slowed to Rs 1.77 lakh crore, down from Rs 1.86 lakh crore in the first quarter of the fiscal.

The data further suggests that the CGST collection stood at Rs 33,821 crore, State GST at Rs 41,864 crore, Integrated IGST at Rs 99,111 crore and cess at Rs 12,550 crore.

GST from domestic transactions grew 10.6% to Rs 1.42 lakh crore, while tax on imports rose about 4% to Rs 45,096 crore during October.

Refunds amounting to Rs 19,306 crore were issued during the month, registering 18.2% growth over the year-ago period.

The net collection (after adjusting refunds) stood at Rs 1.68 lakh crore, up 7.9% compared to Rs 1.55 lakh crore, same period a year ago.

"GST collections close to 1.9 lakh crore and increase in GST collections on domestic supplies by 10% plus depicts the robustness of the Indian economy. Also, it is encouraging to see a significant surge in processing of GST refunds in this month," said Abhishek Jain, indirect tax head and partner at KPMG.

Meanwhile, year-to-date collection (between April and October) grew 9.4% to Rs 12.74 lakh crore. This is compared to Rs 11.64 lakh crore, same period a year ago.

Despite short-term uncertainties, the long-term prospects for GST collections remain promising due to India's expanding consumer base and the government's pro-growth policies, Agarwal said.

"The buoyancy shown in GST collections is on account of an excellent combination of festive season sales and increased compliance happening leading to a 9% increase in the YTD collections," said MS Mani, partner at Deloitte India.

However, he noted the driver of growth appears to be domestic supplies with collections from imports increasing by only 3.6%. "The sharp increase in refunds indicates the stabilisation of the refund process and reduction in rejections due to interpretative issues."

While several large states have reported growth exceeding 9%, some of them, along with many smaller states, have shown below-average increases, raising concerns for those states, he added.