GST mop-up signals economic recovery despite worry over Omicron

 Collections grow 13% in December quarter to Rs 1.3 trillion - the best since July 2017

The goods and service tax (GST) numbers for December cap an extraordinary quarter in terms of receipts from the nationwide tax for the Centre and states. At an average monthly gross collection of Rs 1.3 trillion, the October-December quarter of 2021-22 (FY22) was the best for the Centre and states since GST was introduced (July 1, 2017), showing just how strong economic recovery has been.

Barring May and June, which were impacted by lower economic activity due to the second wave of the Covid-19 pandemic, the first nine months of FY22 have seen encouraging GST receipts at above Rs 1 trillion.

However, the Omicron variant of the coronavirus continues to be a big unknown, in terms of the economic impact. Depending upon how fast the third wave spreads and how severe the restrictions upon businesses are, GST collections in February and March 2022 could be affected, observe analysts.

“What happens in the months to come depends upon the severity of the third wave. The restrictions we are seeing so far are in certain states and for certain activities. So far, no state has imposed mass restrictions the way we saw in the second wave,” said M S Mani, partner, Deloitte India.

Mani said there is no clarity on how severe the Omicron wave would be and what further restrictions it could entail. “Whether there will be restrictions in interstate movement of goods is what needs to be keenly watched,” he added.

Gross GST collections for May 2021 (which would reflect April activity) came in at Rs 97,821 crore, while those for June (a barometer for May's economic activity) were the year’s lowest at Rs 92,800 crore. Hit by a deadly second wave, these were the only two months in FY22 which registered collections of Rs 1 trillion.

“I don’t see a complete lockdown like we saw at the peak of the second wave. But economic activity will definitely get impacted. Yes, the collections could be lower than what we have seen in the past two-three months. However, it may not be as bad as what we saw in May-June,” said Rajat Bose, partner, Shardul Amarchand Mangaldas & Co.