In March 2020, Goods and Services Tax (GST) collections in India dropped below ₹1 lakh-crore after maintaining a 4-month steady rise. According to reports, the total collections stood at ₹97,597 crore.
Dissecting GST Collections
The GST collection was divided into Central GST (₹19,183 crore), State GST (₹25,601 crore), and Integrated GST (₹44,508 crore). Additionally, ₹19,718 crore and ₹14,915 crore were settled to CGST and SGST, respectively, from IGST as part of the regular settlement process. The Centre also divided an unsettled balance IGST of ₹6,000 crore on an ad-hoc basis in a 50:50 ratio between the Centre and States.
COVID-19’s Partial Impact on Revenues
Although these collections represent the business conducted in February, they don’t account for the full impact of COVID-19, which led to the closure of major business sectors across India. Experts warn that the revenues for April 2020 could witness a significant drop due to the pandemic’s influence.
GST Revenues: March 2020 vs March 2019
Compared to March 2019, there was an 8% dip in the Gross GST revenue for March 2020, as reported by the Ministry of Finance.
Decline in Collections from Imports
While there was a 4% decrease in GST revenue from domestic transactions vis-a-vis March 2019, the fall was steeper when it came to tax collected on imports – 23%. The global trade slowdown due to COVID-19 in February is believed to have largely influenced this decline.
Steps to Aid Businesses amid COVID-19
Small businesses have been allowed a three-month deferment of GST payments in response to the COVID-19 crisis. Along with this, a wider industry demand for a payment moratorium and rate reductions has also surfaced.
Understanding GST
GST is an extensive, multi-phase, destination-based tax levied on every value addition making it an essential part of the Indian tax structure. Passed in Parliament on 29th March 2017, the GST Act came into effect on 1st July 2017, thereby replacing many Indirect Taxes in India.
All About CGST and SGST
CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) are taxes levied on Intra State supplies of goods and services. CGST is governed by the Central Government while the State Government governs SGST. Both governments agree on combining their levies for revenue sharing, with the tax rate not exceeding 14%.
The Framework of IGST
On the other hand, IGST (Integrated Goods and Services Tax) applies to all Inter-State supplies of goods and/or services, imports into India, and exports from India. Governed by the IGST Act, it serves as another important part of India’s tax architecture.