Some states have achieved great success collecting record GST revenue. Madhya Pradesh, Karnataka, and Uttar Pradesh have reported the highest growth rate in GST revenue. The growth is marked in the first four months of the current fiscal year compared to the same period of time in the previous fiscal year.
In the mentioned states, the higher growth is the result of a large consumption base, large population, higher purchasing power, and enhanced compliance.
As per the study, the top 15 states having the highest GST collections in value terms, account for 68% of the total collections by all states and Union Territories.
In these sample states, 21% year-on-year GST growth in collection during April-July has been recorded. MP’s economy is significantly dependent on the agriculture sector as 35% of gross value added (GVA) is generated from agriculture and some related sectors only.
The rural spending in the State could have been increased by higher realization from farm produce.
This remarkable growth is followed by Karnataka at 20% and Uttar Pradesh at 19%. While Maharashtra and Tamil Nadu, the first and second largest economies of India, respectively, clocked an 18% growth rate.
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However, Gujarat recorded only a 6% growth rate in GST even after being known as an industrially rich state, which seems unexpected. In other major states, Andhra Pradesh, and Chhattisgarh also clocked growth rates in single digits.
Numbers of National Significance
Combined gross collection of GST of all States and Union Territories (UTs) recorded 5.10 lakh crore in April-July of the current fiscal year as compared to 4.42 lakh crore in the same period of 2022-23, which marked a growth rate of 15% year-on-year. It indicates stronger consumption across the States.
However, when we take the numbers at the national level, growth has reduced by 11.4% to 6.70 lakh crore compared to 6.02 lakh crore in the last fiscal year. The growth shows a decrease when it comes to gross collection because this number also includes integrated (including imports) and cess, apart from Central GST and State GST.
IGST recorded the lowest growth at 8% during April-July because of reduced commodity inflation and reduced import value.
State GST Collection
If the comparison is studied in value terms, the GST collection shows a completely different picture. Maharashtra reserved the top position in the list of States with the highest GST revenue clocking 1.09 lakh crore followed by Karnataka at 47,608 crore, and Gujarat at 41,428 crore. Tamil Nadu and Uttar Pradesh generated GST revenue of 40,135 crore and 34,694, respectively.
GST relies on consumption, therefore, States having high consumption will have higher GST revenue than the States with low consumption.
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Uttar Pradesh is the most populated state in the country, the consumption is more than other in states. Maharashtra, Gujarat, and Karnataka are counted as well-developed states. Therefore, the purchasing power is higher in these states, said a tax expert.
For example, Maharashtra will have higher sales of luxury cars compared to Bihar or Uttar Pradesh, added the tax expert.
Kerala’s GST collection is lower than that of Jharkhand and Chhattisgarh with a collection of 10,413 crores, yet it showed a growth of 15% compared to the previous year.
Compliance
The GST collection, on average, was recorded at 1.51 lakh crore the previous year. As per the statistics, the country’s economy is growing at 12.5%, considering 6.5% of growth in Gross Domestic Product (GDP) and 6% growth of inflation, it is expected that the GST collection will upturn to 1.6 lakh crore this year, said the tax expert.
Further, he added that the government’s relentless efforts to nab the fraudsters and remove the fake registrations and fake invoices will also add to more GST collection this year.
