Pandemic causes May 2021 collections likely to dip by 30% compared to April

The monthly GST collections touched an all-time high for April 2021, recording at Rs.1.41 lakh crore. With May 2021 closing in a week, the government foresees a 30% month-on-month dip compared to April 2021. It is further expected to go down below Rs.1 lakh crore in June 2021 due to the lockdown.

The second wave of the COVID-19 pandemic has a devastating effect on the Indian economy. It is expected to have an impact on revenues for the Central Government as well. GST revenues for May 2021 and June 2021 are anticipated to be adversely affected because of the lockdown imposed by some states to suppress the spread of the virus, according to sources to the ETNow News.

Lockdowns of varying degrees in about two-thirds of the country have resulted in sluggish manufacturing output, with numerous automobile, automotive parts, and electronics companies temporarily shutting down. Daily e-way bill creation has also decreased, indicating a slowdown in economic activity. However, the government anticipates a rebound by July or September 2021, when the second wave fades.

“Demand has dropped dramatically. We experienced supply problems during the first wave. Still, demand has been hammered this time due to the comeback of the virus. We’ve already observed a decrease in the COVID-19 cases in Maharashtra and Delhi. Still, larger states like Tamil Nadu, Karnataka, and Kerala are about to peak, so we’ll see some revival only by July or September,” government sources expressed.

According to India’s central bank – RBI, the most considerable cost of the second wave was a demand shock—loss of mobility, lower discretionary expenditure, unemployment, and inventory accumulation. At the same time, the aggregate supply was less affected.

According to experts, the second wave and an anticipated third wave will further hurdle to the Centre. A combination of delayed privatisation timelines and a revenue shortfall puts the budget calculations in jeopardy.

The fact that the record-high GST collection in April 2021 resulted from increased business activity and sales in March 2021 is one of the crucial aspects that officials have not acknowledged. It’s worth noting that the GST revenue receipts towards March sales were collected in April, so they don’t reflect the economic or business activity occurring from the previous month.

According to many tax experts, tighter compliance procedures such as e-invoicing, data analytics-led investigations, year-end audit, and financial closure of enterprises as of 31st March 2021 have pushed GST collections to a new high in April 2021.

For any clarifications/feedback on the topic, please contact the writer at  annapoorna.m@cleartax.in