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GST collection at all-time high of over Rs 1.41 Lakh Crore

GST collection at all-time high of over Rs 1.41 Lakh Crore

Relevance:

  • GS 3 || Economy || Public Finance || Taxation

Why in the news?

Highest GST collection ever of Rs 1.41 trillion

Background:

  • Launch Of GST
    • The GST was launched at midnight on 1 July 2017.
    • The tax has been evolving over the last 27 months.
    • Since the roll-out of the tax, there have been more than 40 meetings of the GST Council addressing changes in the structure and operations.

Present context:

  • The gross GST revenue collected in the month of April 2021 set a new record of Rs. 1,41,384
  • The GST collections remained above the Rs 1-lakh crore mark for the seventh month in a row in April
  • Despite the second wave of COVID-19 pandemic effecting several parts of the country,
  • Indian businesses have once again shown remarkable resilience by not only complying with the return filing requirements but also paying their GST dues in a timely manner during the month
  • In line with the trend of recovery in the GST revenues over past six months, the revenues for the month of April 2021 are 14% higher than the GST revenues in the last month of March’2021.
  • During the month, the revenues from domestic transactions are 21% higher than the revenues from these sources during the last month

Reason for rise in GST collection:

  • These are clear indicators of sustained economic recovery during this period.
  • Closer monitoring against fake-billing, deep data analytics using data from multiple sources including GST, Income-tax and Customs IT systems and effective tax administration, have also contributed to the steady increase in tax revenue
  • Quarterly return and monthly payment scheme have been successfully implemented, bringing relief to small taxpayers as they now file only one return every three months.
  • Providing IT support to taxpayers in the form of pre-filled GSTR 2A and 3B returns and ramping up system capacity have also eased the return filing process

Future Indicator of recovery of economy:

Indian economy has seen major fall down due to Covid-19 Pandemic, lockdown in previous year amid Covid-19 made economy went through

  • GDP Indications:
    • The National Statistical Office forecasted (-) 7.7% real GDP growth in 2020, compared to the IMF’s projection of (-) 10.3% in October.
    • The monetary policy committee of the Reserve Bank of India had forecasted a GDP of (-) 7.5 percent.
  • Investments:
    • In 2019-20, India received US$ 49.97 billion in FDI equity inflows.
    • Between 2020 and 2021, India received Rs. 12.9 trillion (US$ 174.31 billion) in foreign portfolio investment (as of September 2020).
  • NIBRI Index:
    • In February 2021, Nomura’s India Business Resumption Index (NIBRI), a metric for monitoring the degree of economic normalization, reached 98.1 points. During the national lockdown in April-June, it reached a new low of 44.8.
    • Thanks to fiscal activism, the economy has represented growth prospects.
  • Revival of Imports & Exports:
    • Imports of pearls and precious stones, machinery, and electric products increased by 7.6% in December 2020, indicating that Domestic Economic Activities are reviving.
  • GST Collection:
    • The GST collection was Rs 1.15 lakh crore in December 2020.
    • The collection was the highest since the GST implementation. Read more on Goods and Services Tax (GST).
  • Financial Market Surges: The BSE index jumped 91 per cent from a record low of 25,881 in over 10 months.

Factor that can help in recovering the economy:

  • Atmanirbhar Bharat Abhiyan
    • The economy, infrastructure, technology-driven programs, demography, and demand are the five pillars of this initiative.
    • Three major focus areas were import substitution, reviving demand, and encouraging export-oriented industrialization.
    • Banking, MSMEs, and agriculture are the main beneficiaries of this initiative.
    • In the health sector, the scheme has 500 million beneficiaries.
  • K- Shaped Recovery
    • The Indian economy is expected to recover in a K-shaped pattern.
    • In the September 2020 Quarter, the K-shaped recovery was most visible.
    • In the fiscal year beginning April 1, 2021, India’s GDP is projected to increase by 12.5 percent.
    • Increased inequality would have a negative impact on the economy’s consumption and development.
  • Consumer Attitudes in India:
    • According to the CMIE Report, India’s Index of Consumer Sentiments was 46.8% lower in March 2021 than its average level between April 2019 and March 2020.
    • While Indian households have seen a significant increase in savings, sentiment has not recovered in the same way.
    • The Index of Consumer Sentiments measures how households’ attitudes toward non-essential and durable goods have shifted.
    • During the lockout, the Indian government made fiscal transfers to households in the form of MGNREGA and PM-KISAN, which had an effect on consumer sentiment in rural areas.
    • Market sentiments in households with an annual income of over Rs 10 lakh were the least affected as of March 2021, according to the Consumer Pyramids Household Survey conducted by CMIE.
  • Household Savings
    • According to the Reserve Bank of India’s Centre for Monitoring Indian Economy, household financial savings in India increased to 21% of GDP in the first quarter of fiscal year 2020-21.
    • In 2018-19, household financial savings were 7.2 percent, and in 2019-20, they were 8.2 percent.
    • The Managing Director of the CMIE cited a recent study by the McKinsey Global Institute, which predicted a significant recovery in market demand in countries like the United States, China, and Germany following the end of the pandemic.
    • Households are in a better position to invest when mobility limits are lifted.
    • Household savings would be critical to the economic recovery.

India and world economy:

  • Growth will naturally slow as India becomes more economically developed, with the annual GDP growth expected to sink to 5.8 percent in 2035.”
  • “This growth trajectory will see India become the world’s third largest economy by 2030, overtaking the UK in 2025, Germany in 2027 and Japan in 2030
  • The UK-based think tank forecast that China will in 2028 overtake the US to become the world’s biggest economy, five years earlier than previously estimated due to the contrasting recoveries of the two countries from the COVID-19 pandemic.
  • Japan would remain the world’s third-biggest economy, in dollar terms, until the early 2030s when it would be overtaken by India, pushing Germany down from fourth to fifth.

Conclusion:

India’s economy appears to be in better shape than expected in the aftermath of the pandemic. Government programs, including fiscal and social policies, have aided the economy in fighting the downturn. The covid-19 pandemic has irreversibly altered India’s economic sentiments and functioning, with long-term consequences anticipated.

Mains oriented question:

Economy across the globe has seen major set down due to Pandemic Covid-19 but India has faced major threats, what are the factors that can be responsible for boosting the economy for future. Explain. (200 words)