GST helped states earn 24%
more than the old regime
Finance
minister Nirmala Sitharaman on Monday dismissed concerns that rising goods and
services tax (GST) collections were solely benefiting the Centre. She explained
that the indirect tax system boosted states' revenues by over Rs 9 trillion
between 2018-19 and 2022-23 compared to the amounts that would have been
collected through the earlier subsumed taxes.
It
is a myth that all GST collections are pocketed by the Centre, she wrote on X,
a social media platform, noting that GST significantly contributes to state
revenues.
States
receive 100 per cent of the state GST (SGST) collected within the state, around
50 per cent of the integrated GST (IGST), and 42 per cent of central GST (CGST)
through devolution based on the Finance Commission s recommendations, she
pointed out.
Despite
the end of compensation, state revenues remain buoyant at 1.15. Without GST,
states' revenues from subsumed taxes from 2018-19 to 2023-24 would have been Rs
37.5 trillion. With GST, states' actual revenue amounted to Rs 46.56 trillion,
she said.
Overall,
GST has improved tax buoyancy from 0.72 per cent in the pre-GST period to 1.22
per cent during 2018-23, the finance minister highlighted.
Earlier,
former chief economic advisor Arvind Subramanian had used the different
parameter of GST-GDP ratio to say that the collections have not exceeded the
pre-GST level during 2023-24.
At 6.1 per cent of GDP, the GST revenue for FY24 has still (after 7 years) not
surpassed pre-GST level, he said.
Amid
ongoing campaigning for the Lok Sabha elections, some opposition leaders have
called for reforming GST to empower states.
Sitharaman
emphasised that GST exemplifies cooperative federalism and has also empowered
states. Out of 52 meetings, all decisions but one were reached through
consensus. As chairperson of the GST Council, I have ensured all states voices
are equally heard without bias, she said.
She
praised the new tax system for being pro-poor and beneficial to 4.4 million
small taxpayers and micro, small and medium enterprises (MSMEs).
Sitharaman
stated that the revenue-neutral rate (RNR) of GST has been consistently falling
since 2017, reflecting that it is a pro-poor system, despite collections
rising.
The
RNR was initially suggested to be 15.3 per cent but was 14.4 per cent in 2017 and
further declined to 11.6 per cent in 2019.
Despite
this and the impact of Covid-19 on revenues, GST collections as a percentage of
gross domestic product (GDP) have now reached pre-GST levels, both net and
gross, she said.
This
demonstrates that the Centre and states, collectively, through better tax
administration, are able to collect the same revenue with a lower burden on our
taxpayers, she asserted.
The
finance minister said GST has lowered taxes on many essential items compared to
the pre-GST period. Common items like hair oil and soaps saw a tax cut from 28
per cent to 18 per cent, and electrical appliances are taxed at 12 per cent
versus 31.5 per cent previously. Movie tickets were also taxed at a lower
rate, she said.
She
added that the National Anti-Profiteering Authority has ensured that companies
pass the benefits of GST rate rationalisation to consumers.
In
addition, GST has exempted many essential items and services, such as unbranded
food items, certain life-saving drugs, healthcare, education, public transport,
sanitary napkins, hearing aid parts, and agriculture services.
She
praised the GST system for simplifying complexities and helping millions of
small taxpayers and MSMEs through quarterly returns with a monthly payment
scheme.
Meanwhile,
the finance minister administered the oath to Justice Sanjaya Kumar Mishra as
president of the GST Appellate Tribunal (GSTAT), describing it as the second
milestone after GST collections surpassed the Rs 2 trillion mark in April.
www.business-standard.com
dt. 07.05.2024