​Unwelcome surge, Pg10

Key Highlights:

• India’s June GST collections increased by 13.9% year-on-year, reaching ₹1.95 lakh crore.
• The surge was primarily driven by a 34.6% rise in import IGST, while domestic GST grew by a more modest 6.5%.
• Significant contributors to the import growth in May included a 54% rise in crude and petroleum products and a 34% rise in gold imports by value.
• The government increased the gold import duty from 6% to 15% on May 13 to curb rising imports.
• The Indian rupee depreciated by almost 6% against the U.S. dollar since late February, contributing to higher import costs.

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Detailed Insights:

• The substantial increase in import IGST is largely attributed to imported inflation and currency depreciation rather than robust domestic production growth.
• The nearly 60% surge in gold prices between last May and this May suggests hedging during uncertain times, not broad-based economic activity.
• The performance of India’s eight core industries showed subdued growth of 2.8% in Q1 FY27, significantly lower than 6% in the previous year.
• The HSBC Manufacturing PMI recorded 54.2, indicating steady but moderating factory activity and marking the second-lowest expansion in 13 months.
• GST has completed nine years, expanding the taxpayer base from 66 lakh in 2017 to over 1.65 crore, reflecting improved compliance and formalization.
• Persistent challenges within the GST framework include issues related to Input Tax Credit, ongoing litigation, and federal balance in revenue sharing.

Key Concepts Involved:

• GST (Goods and Services Tax): A unified, multi-stage, destination-based indirect tax levied on goods and services.
• IGST (Integrated Goods and Services Tax): A component of GST levied on inter-state supply of goods and services and on imports.
• Eight Core Industries: Key sectors (coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, electricity) that significantly influence industrial production.
• HSBC Manufacturing PMI: A monthly indicator reflecting the economic health of the manufacturing sector based on surveys of purchasing managers.
• Imported Inflation: An increase in the general price level within a country due to higher costs of imported goods or services.
• Input Tax Credit: The mechanism allowing businesses to claim credit for taxes paid on inputs used in manufacturing goods or providing services.