• India's GST collections for October 2024 show an 8.9% year-on-year growth, indicating economic recovery.
• All components of the GST, including CGST, SGST, IGST, and cess, have seen an increase.
• The rise in GST collections is a positive sign for the economy, especially considering the impact of the COVID-19 pandemic.
• The upcoming GST Council meeting and the decisions taken there will have significant implications for various sectors of the economy.

India's Goods and Services Tax (GST) collections for October 2024 have shown a promising 8.9% year-on-year growth, reaching Rs 1.87 lakh crore. This marks the eighth consecutive month where GST collections have remained above the Rs 1.7 lakh crore mark, indicating a steady recovery in the economy. The data, released by the government, shows that all components of the GST, including Central GST (CGST), State GST (SGST), Integrated GST (IGST), and cess, have seen an increase in the last month.

The CGST collection for October stood at Rs 33,821 crore, while the SGST collection was Rs 41,864 crore. The government also collected IGST amounting to Rs 99,111 crore and cess of Rs 12,550 crore. The first seven months of this fiscal year have seen a 9.4% increase in collections, reaching Rs 12.74 lakh crore, compared to Rs 11.64 lakh crore in the corresponding period of 2023.

This growth in GST collections is indicative of a better economic condition compared to the previous two months when collections had declined. The gross GST revenues from domestic transactions have grown by 10.6% to about Rs 1.42 lakh crore. Revenues from the import of goods have also seen a 4% increase, reaching Rs 45,096 crore compared to the previous year's figures.

Implications of the GST Collection Growth

The government issued refunds worth Rs 19,306 crore during the month, marking an 18.2% growth compared to the same period last year. After adjusting for these refunds, the net GST revenue collection increased by 8% to over Rs 1.68 lakh crore. The average monthly collection for the fiscal year 2024 stood at Rs 1.68 lakh crore, surpassing the previous year's average of Rs 1.5 lakh crore.

This growth in GST collections is a positive sign for the economy, especially considering the impact of the COVID-19 pandemic on economic activities. The GST Council, chaired by the Union Finance Minister and comprising state counterparts, is slated to meet this month to discuss the recommendations of the Group of Ministers (GoM) on rate rationalisation on over 100 items. This meeting is expected to have significant implications for various sectors of the economy.

The Indian economy has shown signs of slowing down, with GDP growth potentially falling below 7% in the Jul-Sep quarter of 2024-25. However, the rise in GST collections, along with other positive indicators such as the rebound in private consumption and higher Capital Expenditure (Capex), suggest that the economy is on the path to recovery.

The Role of RBI and Future Economic Prospects

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) in its second bi-monthly monetary policy meeting of FY24 decided to leave the repo rate unchanged at 6.5%. The MPC voted 5 members to 1 to remain focused on withdrawal of accommodation. The RBI also retained FY24 GDP growth forecast at 6.5%, while expects FY24 CPI inflation to be at 5.1%.

The optimistic growth forecasts stem from a number of positives like the rebound of private consumption given a boost to production activity, higher Capital Expenditure (Capex), near-universal vaccination coverage enabling people to spend on contact-based services, such as restaurants, hotels, shopping malls, and cinemas, as well as the return of migrant workers to cities to work in construction sites leading to a significant decline in housing market inventory, the strengthening of the balance sheets of the Corporates, a well-capitalised public sector banks ready to increase the credit supply and the credit growth to the Micro, Small, and Medium Enterprises (MSME) sector to name the major ones.