The numbers are significant because they are among the first available so-called high-frequency indicators of the economic impact of the pandemic.
Goods and Services Tax (GST) collections for March saw an 8% decline over the same month a year ago to the lowest in five months, and auto sales in the month for India’s largest carmaker Maruti Suzuki were down almost by half as the lockdown imposed to combat the spread of the coronavirus disease (Covid-19) took a toll on the economy.
The numbers are significant because they are among the first available so-called high-frequency indicators of the economic impact of the pandemic and the hard lockdown that India has imposed for three weeks till April 14 to slow its progress. Over the next few days, more indicators, including Purchasing Managers Index, a measure of economic health, will become available.
GST collections in March fell to Rs 97,597 crore. Apart from Maruti, which has a close-to-50% share of the Indian car market, Tata Motors, the leading maker of trucks and buses, said sales of these commercial vehicles were down 87% in the month. Demand for commercial vehicles is considered an indicator of economic activity. India imposed a lockdown starting March 25. The lockdown has exacerbated an existing slowdown in vehicle sales. Sales at Hyundai Motor were down 47% in the month and at SUV-maker Mahindra & Mahindra by 88%.
Analysts and economists say India is unlikely to meet its target of 5% growth in 2019-20 and have revised downward their estimates for 2020-21 too. SBI Research said in a report that India could grow by 4.5% in 2019-20 and 2.6% in 2020-21. Nomura has said in a report that it expects India’s GDP to fall by 0.5% in 2020 (calendar year), revising its earlier estimate of 4.5% growth.
Total GST for the financial year 2019-20 has increased by 3.8% to Rs 12,22,131 crore compared to Rs 11,77,369 crore collected in 2018-19.
Experts said things could get worse. Abhishek Jain, tax partner at consulting firm EY, said, “With most businesses being non-operational for a considerable period in March and the relaxation of delayed payments being allowed, the collections in the coming quarter would see quite a fall.”
The fall in March breaks the trend of four months of robust GST collections since November that saw monthly revenue figures crossing the Rs 1 lakh crore benchmark.
Out of the gross GST revenue for March, the share of central GST is Rs 19,183 crore, state GST is Rs 25,601 crore, integrated GST is Rs 44,508 crore (including Rs 18,056 crore collected on imports) and cess is Rs 8,306 crore, a finance ministry statement said.
Pratik Jain, partner and leader of Indirect Tax practice at PwC India said although the March collection has seen some impact of the Covid-19 lockdown, the real impact would be reflected in April. “There is around 7% reduction in filing of GSTR 3B (returns) over last month. It seems that many businesses may not have been able to pay GST because of liquidity issues.”
Vishal Raheja, deputy general manager (DGM), Taxmann said: “It is noteworthy that the import of goods has also shown a negative growth of 23% as compared to March 2019. It has also played a crucial role to push back the GST collections.”
Experts said the impact of coronavirus and consequent lockdown of major economies will continue to be a drag for global growth and India will also be impacted. International Monetary Fund (IMF) managing director Kristalina Georgieva said last week that the outlook for global growth in 2020 is negative and remarked it a recession “at least as bad as during the global financial crisis (2008) or worse”. Moody’s Investors Service on Friday slashed India’s economic growth projection for calendar 2020 from 5.3% to 2.5% and ICRA Ltd estimated India’s growth at 2% for FY-21.
