High-end goods, services boosted GST collection; mass category subdued

High-end goods and services have contributed more to the buoyant GST collections in FY23, as various data points and several economists seem to suggest. Economists also believe that once income distributionbecomes more equitable, goods and services of mass consumption will increase and, in turn, support GST collection growth.

GST collection in fiscal year 2022-23 stood at ₹18.10 lakh crore, which is 22 per cent higher than in FY2021-22. Average gross monthly collection for the year was ₹1.51 lakh crore, as against around ₹1.4 lakh crore in FY21. Collection in April this year touched all-time high of ₹1.87 lakh crore, which is related to consumption of goods and use of services in March.

Collection from GST compensation cess (in ₹ crore)

Although the government does not provide product- or services-wise data for GST collection, one key indicator to gauge the consumption pattern is the rise in GST compensation cess. FY23 recorded over 18 per cent increase in compensation cess to about ₹1.17 lakh crore as against around ₹1 lakh crore in FY22. Compensation cess is levied on certain goods that attract 28 per cent GST, such as automobiles, aerated beverage and tobacco. Barring tobacco and coal, the rate of cess on other products are ad valorem — that is, percentage of absolute value.

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During FY23, sale of utility vehicles (SUV, MUV, and so on) saw a growth of around 35 per cent. These vehicles attract GST at 28 per cent and cess of 15-22 per cent. Data from IDC shows that sale of high-end mobile handsets grew 20-55 per cent. GST on mobile handsets is 18 per cent. Data from CRISIL shows impressive growth in occupancy and room tariffs in premium category hotels. Here, GST for room tariff exceeding Rs 7,500 is 18 per cent. DGCA data shows that domestic air traffic grew by over 62 per cent in FY23. Air tickets attract GST of 5 per cent (economy) and 12 per cent (business).

Booming demand for high-value goods and services

Utility vehicle sales grew to over 20 lakh in FY23 from 14.9 lakh in FY22 

Domestic air traffic grew to 27.03 crore flyers in FY23 from 16.68 crore in FY22 

IDC says smartphone sales in the mid-premium ($300-500) and premium ($500-plus) price segments grew 20% and 55%, respectively, in 2022 

CRISIL Market Intelligence & Analytics says average room rate of premium hotels increased 13% on-year in fiscal 2022 and expected to rise 19-21% in fiscal 2023 to a decadal high of ₹7,500-10,000. Occupancy level, which was at 50% in fiscal 2022, will touch a decadal high of 67-72% this fiscal.

In a note on GST collection, Principal Economist Sunil Kumar Sinha and Senior Analyst Paras Jasrai of India Ratings & Research say the K-shaped recovery in the economy is not allowing broad-based consumption demand. As a result, “while there is visible demand for high-end automobiles, mobile phones and other luxury items, demand for items of mass consumption is still subdued,” the note said.

Echoing this, Rajni Sinha, Chief Economist of CARE, says the high-end segment is doing relatively better than the mid-price or the low-price segments. “It is one income category (high) which is doing very well; the demand from that category is pretty strong and hence the premium segment is doing very well and that would also have contributed to this high GST collection,” she said.

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