Yes, it is true – GST collections in India for the month of April 2021 is Rs. 1.41 lac crore and everyone is baffled as to how the economy has shown such resilience even as the pandemic continues to rage across the nation.
I’ve heard a lot of people saying that this is a made up figure, as businesses were shut in most parts of the country throughout April and industry revenues have been hit across the economic spectrum. Well, correct! Economy has been hit, but the collections done in April are of the period from 1st March to 31st March 2021, when the pandemic had just started it’s resurgence and when economic output had picked up steam.
Now, 1.41 Lac crores is a lot of money. What is praiseworthy is the fact that this sum has been collected at a time when lockdowns had been reimposed in many big states including Maharashtra, Gujarat, UP, etc. We should rather be asking that how this sum has been collected- what are the main factors?
Factor 1 – Past Experience. Work from home has been aced by many corporate houses. Everything has more or less become paperless. Life has shifted from on-site to online. And so has the Accounts Department. When data is available on time, lockdown or no lockdown- taxes can be paid on time and before the due dates.
Factor 2 – Price rise in major volume-intensive commodities. GST is an indirect tax which is charged on the invoice value. If the value of the goods or services increases, GST automatically increases. GST collections have received a major fillip due to rise in prices of steel, cement, etc.
Factor 3 – Stricter Vigilance. As the GST law gains vintage and some familiarity develops, government brings about various fundamental changes to improve the system and close all gaps. With GST gaining adequate vintage, now the council has enforced a lot of strict rules. Fake billing has reduced considerably. This has helped in preventing tax revenue leakage, which happened freely hitherto. News of Directors/CAs/management being arrest and charged with fraud have become commonplace these days thanks to tightening of the norms. This is the hallmark of a robust economy undergoing paradigm changes.
Factor 4 – March means Year End. India follows April to March Financial Year. As March comes, everyone moves to record all such transactions, which have been done throughout the year but not yet recorded, or which are on-going on the balance sheet date. This leads to increased revenues, even though just on paper. And increased revenues translate into increased GST collections.
While there is no denying the fact that the economy was not just recovering, but growing in leaps and bounds post the first wave subsided, it should be kept in mind that in a country like India, with it’s enormous population – economy is always expected to grow as long as businesses run. The demand supply gap is huge and if trends are anything to go by, it is ever increasing.
We ought to praise all our businessmen, for paying up their dues at a time when one would be tempted to save every last penny. We ought to praise our GST practioners, who, despite everything going digital so quickly, have adapted and delivered.
However, before bidding adieu, I’ll just leave you with one food for thought- regarding collections for the month of May 2021 (i.e GST for the period 1st April to 30th April 2021). The same should fall drastically on account of multiple factors. It won’t be a surprise, if it dips below Rs. 1 lac crore. Though, that would be an issue of discussion for some other blog.
Stay Home. Stay Safe.