Blogging about Society, individual and collective behaviour/herd mentality, nudges,economics,business,politics,sports and spirituality and on all the other subjects about which I know very little !!
The GST collections trend in India upto June 2023 in FY23-24:
April 2023: Rs. 1,87,035 crore (highest ever)
May 2023: Rs. 1,57,079 crore
June 2023: Rs. 1,61,497 crore
The average monthly gross GST collection for the first half of FY23-24 is Rs. 1,69,000 crore. This is 12% higher than the average monthly collection for the same period in FY22-23.
The GST collections have been consistently growing in the current financial year. This is due to a number of factors, including the strong growth of the Indian economy, the increasing compliance with the GST law, and the government's efforts to boost digitization and transparency in the tax system.
The average monthly gross GST collection for the first quarter of the FY 2021-22, FY 22-23 & FY 23-24 are Rs. 1.10 lakh crore, Rs. 1.51 lakh crore and Rs. 1.69 lakh crore respectively, the finance ministry said.
The gross revenue has crossed the 1.6 lakh crore mark for the fourth time since the inception of GST in the country.
With the Economy Budgeted to grow at a Nominal Growth rate of 10.5% in this fiscal, the GOI is confident of reaching its GST revenue targets comfortably, if the same momentum is sustained for the rest of the year.
The second half of the year will be crucial in that respect since the Global recession is expected to hit the country's imports and exports and consequently this will impinge on GST revenues.
GOI and RBI may have to work with Growth supporting measures at that time.Let us cross the bridge when we come to it!
Mr.N.Venkatraman,Additional Solicitor General,GOI, has clearly brought the key aspects of this landmark judgment delivered by SC. The confusion stemmed from the attention-grabbing headlines made by media, stating GST Council recommendations are non-binding on Centre and States and have only persuasive value at the most.
The nuanced reading of this Judgment with its emphasis on cooperative federalism has not been clearly understood by opposition-ruled states like TN. Politicians ruling in the States rarely understand that Cooperative Federalism is a multiway street.CF not only means harmony in the Centre-State relationship, but also means InterState harmony ( not at all seen even between contiguous States like TN,Kerala, Karnataka,AP)and finally also means Intra-state harmony. When they keep harping on the point that States are not consulted by the Centre with respect to Indirect Taxation, they forget to what extent they do consult the Stakeholders like Industry and citizens before bringing in Changes in taxation within their realm say Property Tax,local Bodies Tax etc. within their States.
States lecture about Cooperative Federalism to the Centre only when it is convenient for them on issues that impinge on their rights and ignore when it comes to bilateral or multilateral issues and shift the blame to the Centre. The concepts of 'give and take" and coordinated and synchronized functioning with right balancing of their interests, are a must for a healthy and robust relationship between the various organs of the Union of India which is akin to functioning of a Human body.
It is said "there is a world of difference between precept and practice"- more so with our politicians and the gap widens when they speak about it more.!!
It is generally thought that Political lies are always for exploiting the ignorance of the public. Mostly they are manipulative for winning the elections. But there are times like Obama lies about Health care inorder to push through some legislation to benefit the larger society(link).
However coming to India, Politicians throw promises at the people mainly to win elections and then they renege on the promises made.
In the recent few weeks there are lot of accusations by the Opposition parties against the Central Govt that Question Hour in the ensuing Parliament has been abolished muzzling the freedom of MPs to ask Govt questions about peoples' problems to elicit answers from the Govt. But there are two stark statistics contradicting the so-called champions of freedom of expression in the Opposition. In the last few years Question hour in the parliament has been wasted for 60% of the time by the unruly Oppositions marring the proceedings of the house. Another interesting point is that in the Opposition ruled West Bengal Question Hour has been suspended by the Govt in view of the prevailing pandemic.!!
So this is clearly double standards adopted by the Opposition and it is raised against the Central Govt only to embarrass it and score some brownie points in the media.
Many of the Opposition ruled State Govts prune the budget of the local bodies saying that the State level finances are severely constrained. But if the Central Govt does it, all of them raise their voices against the Centre saying that the Central-State relationship is severely undermined and the trust of cooperative federalism has been betrayed by the Centre. They have no such qualms when they repress the local bodies by not releasing the funds to them. These are the doublespeak adopted by the opposition parties as a matter of right and pride.Our society does not relish this behaviour of politicians which they do not understand.
Centre and States are like two important organs of the body which is India. Both must work in tandem and in coordinated rhythm. Brain cannot let the Heart down and Heart cannot afford to stop blood supply to Brain. They cannot be at loggerheads with each other. This is the fundamental concept which Politicians must keep in their minds while performing and discharging their Constitutional duties.
India's FM is an unenviable position. Given the penchant for two steps forward and one step backward in all economic decisions, FM is in the eye of the storm unendingly ever since the pandemic struck India. In fact, even before that, India's GDP was sliding YOY from 2016-17 onwards. It hit a high of 8.26% in 16-17 and hit the lowest so far in Fiscal 19-20 at 4.2%.
GST collections have also ebbed along with the GDP since even Nominal GDP has grown only by 7.2% in Fy 19-20.It was growing at 11.76% in Fiscal 16-17. So, this skidding of the nominal growth rate coupled with a reduction in GST rates in 2018 led to a shortfall in GST collections even though the tax base widened. The good thing about the One Nation, One tax has been the acceptance of this Taxation in lieu of VAT at the individual state level and Excise duty at the Central level. The consensus behind GST has been bought by Arun Jaitley with the commitment for providing Central funds at the growth rate of 14% YOY to the individual States, by levying Compensatory cess on luxury and sin goods. However, the Central Govt is caught on the wrong foot this year due to the pandemic. The tax collections are abysmally low and this has forced the Central Govt. to consider reneging on its promise of providing compensatory funds to the states.
In the recent 41st GST Council meeting, FM has been compelled to use the insurance phrase of Act of God i.e force majeure(or Hand of China?!), to describe the extraordinary situation due to the Covid pandemic. Due to this compulsion, the Central Govt has presented two options to the States to consider and give their replies in a week's time. Under Option 1 States may borrow Rs.97K cr at a special interest rate and the principal and the interest will be later on paid out of Compensatory cess on Cars, Soft drinks, tobacco, pan masala, and coal. Under Option 2 States can borrow up to Rs.2.35lac cr and States will have to pay interest at the market rates.Only the principal will be paid out of Compensatory Cess later and the interest will have to be provided in the States' Budgets. In this GOI has made a fine distinction between GST implementation loss and Covid induced tax revenue loss which is also hair-splitting and needlessly academic, if not contentious.
Now the overall emerging scenario is one of confrontation between the Centre and the States. All economists are now supporting the States saying that since it is the commitment of the Central Govt. it has to find the resources for funding this GST collection shortfall. Of course, they are of the view that the Central Govt can source this fund at a much cheaper cost than what the States could bargain for.This is an important point. However Finance Secretary has gone on record saying that if the Centre resorts to this borrowings, overall bond yields may go northwards, which will raise the cost of borrowings for both the Public sector and Private Sector. As a consequence, the sovereign rating of the country may be adversely impacted which will be detrimental to the interests of all sectors of the economy. But the moot point is this can happen even if States borrow for this purpose.
In the meantime some of the opposition ruled states are considering approaching SC for a direction to the Central Govt, saying that the Centre is trying to hide behind AG's legal opinions, shirking its responsibility in honoring the revenue commitment in letter and spirit. But such an outcome may not augur well for federal relationships and for the future of cooperative federalism which is touted as the big success point behind GST introduction.
However, in all this surcharged situation over who should shoulder the borrowing burden, the missing point is how well or badly States are containing their deficits in the last few years despite being given higher level of funds without much of efforts from their side. Any additional funds given without caveats are being frittered away by them in giving freebies, free EB and in unplanned revenue expenditure. So who is going to discipline them and rein in their penchant for spending without answering for outcomes? Even in May 20, when Centre gave permission for Additional borrowings through the WMA window, many states incl. Tamilnadu objected to the thinnest of the sticks like DBT transfer of EB subsidy to BPL families, that came with the carrot. States only want the carrot as their right without any strings being attached.
That said, Central Govt. must seize this opportunity to bring to light the importance of fiscal discipline at the State level by finally agreeing to resort to the borrowings on their behalf.
If you consider the Center and the State as the right and the left hands of the same person, sometimes when your right hand is full of weight to be lifted, the left hand also should chip in to bear the weight in order to balance it. Left cannot accuse the right of transferring some of the weight to it!!
