COVID 19 economic trouble is only just the beginning
In the times of COVID-19 when businesses are struggling to remain afloat and the economy is slowing down as a result, we have another massive issue to grapple with viz. reduced GST collections by the Government. The Centre announces the latest figures for GST on the first of every month. However, on May 1st, the government decided to defer this announcement as a result of the pandemic crippling any form of economic growth in the country.
The month of March witnessed a lot of businesses and establishments backtracking and halting activities as the country was approaching a massive lockdown. The government allowed businesses a grace period to file their GST returns which resulted in a decline of GST collections. However, the downward trend was pre-existent to the COVID-19 situation. This can be seen in the unimpressive collection numbers for the month of February, in addition to March and April. In April, the indicative number of e-way bills that were issued to move supplies worth or more than ₹50,000 dropped from 57.2 million in February to 6.2 million in April.
GST is one of the major revenue generation tools and is the backbone of the trading ecosystem in the country. In 2017, when the government decided to scrap the old system and replace it with the reformed and improved GST system, it aimed at building a transparent and seamless process for registered taxpayers in the country making it easier for them to file their returns. However, since the introduction of the GST bill, there have been unforeseen complications like delays in refunds due to complicated filing procedures and cash management concerns amongst other issues for the taxpayers. It has been a continuous process of trying to make the system better ever. The Central Government projected gross tax revenue at 24.2 trillion in the Budget 2020-21, of which 6.9 trillion accounted for GST collections which seemed too ambitious as the numbers started dipping from February at an average of 8%. 13 out of 19 states have witnessed GST growth in single digits.
It’s a conundrum for the State and Central governments as revenues are lower but expenses are higher owing to the current pandemic situation. They are facing a cash crunch and lower GST collections is another addition to the existing plethora of issues we are facing as a nation. The three year old GST system which has shifted to a monthly model as opposed to the older quarterly model has lowered the threshold of taxpayers who have to file their returns on a monthly basis now. Also, the infrastructure is unable to handle the large sum of requests that are coming in on a daily basis which has resulted in delays. In addition to technical issues, there are issues related to availing input tax credit and tax refunds liable to exporters. There has to be a robust system in place to battle this problem to increase cash reserves by stimulating increased GST collections from businesses, taxpayers, traders and retailers across the country.
Prepare your business for e-invoicing under GST
Discover how to meet all compliance requirements while integrating e-invoicing into your tax function.
Stay up to date
Sign up for our free newsletter and stay up to date with the latest tax news.