All GST collections pocketed by the Centre is a myth: Nirmala Sitharaman breaks down the math
All GST collections pocketed by the Centre is a myth: Nirmala Sitharaman breaks down the math
Finance minister Nirmala Sitharaman has panned views that GST collections were solely benefiting the Centre. In a post on X, she said states get 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.
“It is a myth that all GST collections are pocketed by the Centre,” she wrote. “GST has improved tax buoyancy from 0.72 (pre-GST) to 1.22 (2018-23). Despite compensation ending, 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 further wrote.
“Despite the GST rate being less than the prescribed Revenue Neutral Rate and COVID-19 affecting the revenues, GST collections (as a % of GDP) have now reached the levels they were before GST (both net and gross). This demonstrates that the Centre & States, collectively, through better tax administration, are able to collect the same revenue with a lower burden on our taxpayers,” Sitharaman wrote.
GST “exemplifies cooperative Federalism in India, empowering states”, she said, adding that it has improved tax buoyancy for states.
“Reflecting a pro-poor approach, the effective weighted average GST rate has consistently fallen since 2017. The Revenue Neutral Rate was suggested to be 15.3 percent but was lower at 14.4 percent in 2017, and it has come down to 11.6 percent in 2019,” she said.
Sitharaman underscored that the recent milestone of GST collections exceeding Rs 2 lakh crore was propelled by heightened economic activity, marking a positive trajectory for the nation’s fiscal landscape.
Highlighting the evolution of the GST tax structure since its inception, Sitharaman mentioned that the effective weighted average GST rate has consistently decreased, demonstrating a commitment to progressive tax policies. She elaborated on the measures taken to rationalize tax rates and ensure that the benefits are passed on to consumers, underscoring the role of the National Anti-profiteering Authority in this process
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