Sales tax collection falls to 19-month low in Sept

Collections from India’s nationwide goods and services tax (GST) fell to a 19-month low in September, data showed on Tuesday, increasing the risk of fiscal slippage at a time when demand continued to remain weak in Asia's third largest economy.

The tax collections for September stood at 919.16 billion Indian rupees ($12.93 billion), a fall of 2.7% from last year and the first drop since the beginning of the 2019/20 fiscal year in April.

The government needs an average monthly collection of more than 1 trillion rupees every month to meet its budget target.

The lower collection will further exacerbate the risk of the country slipping from its fiscal deficit target of 3.3% of gross domestic product in 2019/20, especially after government tax revenue for the current fiscal year was reduced by 1.45 trillion rupees due to cuts in corporate tax rates.

The government's direct tax collections growth since the beginning of the current fiscal stands at 6% so far, below the required growth rate of 17%.

Lower tax collections reflect relatively weak economic growth, which fell to a six-year low of 5% in the April-June period.

On Monday, the government released India's infrastructure output data which showed contraction for the first time since 2015, signalling a tepid recovery in the July-September quarter and enhancing the chances of further interest rate reduction by the Reserve Bank of India later this week.

($1 = 71.0620 Indian rupees)