The government managed to rake in just over Rs 18,000 crore through integrated GST (IGST) on imports in March, the lowest since the new tax regime kicked in 30 months ago, indicating that collections in the coming months are expected to be weaker, putting additional pressure on the government that is facing demands for fiscal stimulus in the wake of the coronavirus pandemic.
Collections in March are related to sales or import consignments in February and the numbers are lower than the previous low of Rs 19,603 crore raised in February 2018. Low collections from imports point to not only a significant decline in the value shipments into the country but also a further moderation in economic activity.
The numbers on the cess on imported luxury and sin goods, however, were not the lowest ever, although collections under this head, estimated at Rs 841 crore, declined 20% compared to the previous month and 5.6% compared to a year ago.
Tax officials said the latest IGST numbers for March were probably on account of factory shutdowns in China due to coronavirus, which resulted in lower shipments of basic drugs, plastics and even electronic components that are used for manufacturing mobile phones and other devices.
Although the government had ordered a nationwide lockdown in the last week of March, economic activity had slowed down in the initial days of the months as Covid-19 cases began to rise across the country, limiting manufacturing and imports.
The global economic shutdown has raised concerns in the finance ministry over the amount that the Centre can hope to raise through taxes – both direct and indirect. While there has been a deferment in GST payments for small businesses for three months, with no interest or penalty to be charged, larger businesses will need to pay interest on delayed payments. But with business confined to essential goods and services, the amount of taxes coming during the first quarter is bound to be low, officials conceded.
And, lower tax revenue is going to impact the spending of not just the Centre but even states since they have an over 40% share, which will force them to increase borrowings to sustain their spending.
Source: Economic Times
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