Inflation has a role in higher GST collection, says Revenue Secretary Tarun Bajaj

Revenue Secretary Tarun Bajaj on Tuesday acknowledged that inflation has contributed in higher GST collection. He also said that higher inflation pushed further the rate rationalisation for the time being.

Further, Chairman of the Central Board of Indirect taxes & Custom Vivek Johri said that inflation affects prices of both inputs and outputs.

“Revenues are going up because of inflation, real GDP and compliance and economy coming back after Covid and some of the sectors coming back with vengeance. Last year gross GST revenue was up 30 per cent, while nominal GDP was 19.5 per cent. So there was good buoyancy. I don’t think this buoyancy can come only from inflation but also because of compliance and formalisation,” he said while addressing an event to mark five years of GST, organised by GST.

Retail inflation based on consumer price index (CPI) has been over 7 per cent for April and May. Similarly, producers’ inflation based on wholesale price index (WPI) is over 15 per cent during May and June. At the same time collection of GST in April rose to over ₹1.6-lakh crore and crossed ₹1.4-lakh crore in June. Since, GST is consumption based taxation; there has been a common feeling that higher prices of goods and services contributing in higher collection of GST.

“Inflation is contributing to this. Indirect taxes have an impact on inflation and that is why the Council has been little cautious not to burden the common man (by doing rate rejig). They are conscious of the fact,” Bajaj said. Taking it further, Johri made it clear that inflation is not the major contributor in higher GST collection.

Reforms

Responding to criticism of blockage of input tax credit (ITC) and refund, Johri said almost, 56 per cent of taxpayers are paying GST with the help of credit only. He also highlighted various measures, as recommended by GST Council.

For example, the council recommended amendment in formula for calculation of refund of unutilised ITC on account of inverted rated structure. Change in formula for calculation of refund to take into account utilisation of ITC on account of inputs and input services for payment of output tax on inverted rated supplies in the same ratio in which ITC has been availed on inputs and input services during the said tax period. This would help those taxpayers who are availing ITC on input services also.

Another amendment provide for transfer of balance in electronic cash ledger of a registered person to electronic cash ledger of CGST and IGST of a distinct person. The rules providing for the manner of calculation of interest under section 50 of CGST Act have also been recommended for more clarity. This will remove ambiguities regarding manner of calculation of interest and will also provide for transfer of balance in CGST and IGST cash ledgers between distinct persons, thereby improving liquidity and cash flows of such taxpayers.

Johri informed the gathering that 96 per cent refund of IGST being paid within seven days of filing as entire system is automatic. “Overall amount of ITC and IGST has gone substantially high,” he said.

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