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…achieved 48% of full-year target (FY23BE) over Apr-Aug’22

* GST collections in Aug’22 grew 28.2% YoY to INR1.4t. The collections contracted 3.6% MoM in Aug’22 v/s 3.0% MoM growth in Jul’22. GST collections have been in the range of INR1.3t-1.7t for 11 months now.

* With this, the government collected INR7.5t worth of GST during Apr-Aug’22, which was ~48% of FY23BE compared with INR5.6t collected during the corresponding months last year (reaching ~44% of FY22BE).

* Within the total, CGST collections amounted to INR247.1b (+20% YoY) and SGST collections stood at INR309.5b (+16.3% YoY). Much of the growth in total GST collections was propelled by imports. While GST collections on imports continued to grow strongly by 56.5% YoY to INR420.7b, collections on domestic activity rose 19.3% YoY to INR1.0t in Jul’22.

* To understand the implications, we conducted an analysis to segregate the impact of inflation on GST growth. We took 78 items constituting 60% weightage in the Consumer Price Index (CPI) basket (these items fall under the GST tax) and used them to deflate nominal GST collections on a monthly basis. Our calculation suggested that real GST collections grew 20% YoY in Aug’22 compared with nominal GST growth of 28% YoY. This analysis confirmed that recovery in domestic activity is not as strong as the headline numbers suggest.

* E-way bill generations in Jul’22 stood at 2.4m units/day, slightly lower than 2.5m units/day in Jun’22. This corroborates with the lower GST collections data for Aug’22 (for economic activity in Jul’22).

* Overall, 48% of full-year GST target was achieved in just five months – the highest since inception. Going ahead, the government needs to receive ~INR1.2t of GST on an average in the next seven months of FY23 to achieve its full-year goal. The continued high collection momentum suggests that government might overshoot its GST collection target by roughly ~INR1.5t in FY23E. If so, this might aid the government to exceed its total receipts target, thereby, leading to a slightly lower fiscal deficit of 6.2% of GDP (v/s FY23BE of 6.4% of GDP), provided spending target is met accurately.

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