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MOSL: ECOSCOPE-GST collections less than desired in April-May-Spending cuts in FY18 worst in at least two decades

ECOSCOPE: GST collections less than desired in April-May; Spending cuts in FY18 worst in at least two decades

 

• With goods & services tax (GST) in place, the volatility towards the year-end and year-beginning has disappeared. In contrast to the pre-GST period based on Controller General of Accounts (CGA) data, indirect tax receipts declined in March 2018, but more than doubled in April 2018. Cumulatively, however, the indirect taxes received in the two months declined slightly, which is concerning.
• In line with weak receipts in March-April 2018, total spending also declined 21% YoY in the 2-month period. While capital spending fell ~87% YoY, revenue spending fell 4% YoY. To meet its FY18 fiscal deficit target, the government had to cut spending to 96.6% of revised estimates (RE), the lowest in at least the past two decades.
• Separately, GST collection in the first two months of FY19 averaged INR987b, less than the monthly target of INR1.06t for FY19. It implies that the monthly GST collection for the rest of FY19 should be closer to INR1.08t. Notably, the share of unallocated IGST has also increased in April-May 2018.