The new government is likely to further tighten GST norms due to poor revenue collection in the last financial year. The government is facing a revenue shortfall of Rs 1 lakh crore. Though monthly receipts have picked up recently, the entire collection of FY 2019 is not enough to meet the government’s own estimate. The looming pressure on the fiscal position may push the government to implement invoice matching and reverse charge mechanism in the coming days. A finance ministry official privy to the matter said revenue collection issues would be discussed in the GST council meet in the first half of June. The actual gross GST collection dipped 10 percent to Rs 11.77 lakh crore in FY 2019 from the budget estimate. The collection was also lower from the revised estimate by 3 percent. The GST collection for FY 2019 was expected to be Rs 13.13 lakh crore, which was revised to Rs 12.13 lakh. However, in April, GST revenue collection reached its peak. Total collections stood at Rs 1,13,865 crore, the highest since its rollout in 2017.
Finance ministry sources said revenue targets for FY 2020 might be revised in the July budget, given the trend in the previous fiscal. The government is also mulling widening the GST net to include new sectors such as electricity, petroleum and alcohol under its purview. At present, the average monthly GST collection is Rs 0.98 lakh crore against the revised estimate of Rs 1.2 lakh crore. In April, collections crossed Rs 1 lakh crore for the third time in four months. Experts said this shortfall is on account of reduction in GST rates for multiple commodities and services. “Some of the weaknesses in FY19 could be on account of tax cuts in July and December 2018. GST collections as a percentage of non-Agri GDP had fallen sharply but have now recovered,” economists Sanjay Mookim and Nafisa Gupta of BofA Merrill Lynch, a US-based multinational investment bank, wrote in a note. Reverse charge mechanism (RCM) is a popular method of collecting taxes on all such supplies where the tax administration does not want to put compliance burden. GST envisages two such provisions under Section 9. Though one section that refers to supplies from unregistered suppliers has been put in a state of comatose, another provision Section 9(3) is being lucratively used by the revenue department.
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