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Collections for 2MFY23 at ~20% of the full-year target

* GST collections in May’22 totaled INR1.4t, implying a 12-month high growth of 44% YoY. However, on a sequential basis, GST collections contracted 15.9% MoM as against the record high collections of INR1.7t in Apr’22. Nevertheless, this is the 11th consecutive month of more-than-INR1t collections and the third month of more-than-INR1.4t collections.

* With this, the government has collected INR3.1t of GST during Apr-May’22, which is ~20% of FY23BE v/s INR2.4t collected during the corresponding months last year (which was ~19% of FY22BE).

* Within the total, CGST collections amounted to INR250.4b (+42.3% YoY led by low base) and SGST collections amounted to INR320b (+41.3% YoY). While GST collections on imports continued to grow strongly by 43% YoY to INR374.7b, collections on domestic activity too rose 44% YoY to INR1.03t in May’22.

* Additionally, e-way bill collections in Apr’22 stood at 2.5m units/day, similar to Feb’22 and Mar’22. However, actual GST collections in May’22 reduced compared with Feb’22 and Mar’22. This implies that either the volume of goods has reduced or the value has shrunk. While the former indicates slower economic activity, the latter may imply lower inflation.

* Overall, achieving ~20% of the full-year GST target in just two months is the highest since inception. Going ahead, the government needs to receive ~INR1.25t of GST on an average in the next 10 months of FY23 to achieve its full-year goal. Looking at the momentum of collections, it is likely that the government might overshoot its GST collections target by roughly ~INR1.5t in FY23E. If so, its additional expenses in terms of higher fertilizer and fuel subsidies this year might get completely covered, leaving less pressure on FY23E fiscal deficit.

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