GST helped states earn 24% more than the old regime: FM Sitharaman

Union Finance Minister Nirmala Sitharaman (Photo: PTI)

Finance Minister Nirmala Sitharaman on Monday dismissed concerns that rising Goods and Services Tax (GST) revenues would solely benefit the Centre. She explained that the indirect tax system has increased states’ revenues by over Rs 9 trillion between 2018-19 and 2022-23, compared to the amounts that would have been collected through the previously subsumed taxes.

“It is a myth that all GST collections are pocketed by the Center,” she wrote on X, a social media platform, noting that GST contributes significantly to state revenues.

States receive 100 percent of the State GST (SGST) collected within the State, about 50 percent of the Integrated GST (IGST) and 42 percent of the Central GST (CGST) through decentralization based on the recommendations of the Finance Commission , she emphasized. out.

“Despite the end of compensation, state revenues remain high at 1.15. Without GST, states’ revenue from subsumed taxes would have been Rs 37.5 trillion from 2018-19 to 2023-24. With GST, the actual revenue of states was Rs 46.56 trillion,” she said.

Overall, the GST has improved tax strength from 0.72 percent in the pre-GST period to 1.22 percent in the period 2018-2023, the Finance Minister pointed out.

Despite recovery from the pandemic and better implementation, GST revenues for FY24 @ 6.1% of GDP (after seven years) have still not risen above pre-GST levels

Sitharaman emphasized that GST is an example of cooperative federalism and has also empowered states. “Of the 52 meetings, all but one decision was reached by consensus. As the chairperson of the GST Council, I have ensured that the voices of all states are heard equally, 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 the GST has continuously declined since 2017, indicating that it is a pro-poor system despite rising collections.

Initially it was suggested that the RNR would be 15.3 percent, but in 2017 it was 14.4 percent and fell further to 11.6 percent 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 shows that the Center and the states collectively, through better tax administration, are able to collect the same revenue at a lower burden on our taxpayers,” she asserted.

The Finance Minister said that GST has reduced taxes on many essential items compared to the pre-GST period. “Common items such as hair oil and soaps saw a tax cut from 28 percent to 18 percent, and electrical appliances are taxed at 12 percent, down from 31.5 percent previously. Movie tickets were also taxed at a lower rate,” she said.

She added that the National Anti-Profiteering Authority has ensured that businesses pass on the benefits of GST rate rationalization to consumers.

Moreover, the GST has exempted many essential items and services such as unbranded food products, certain life-saving medicines, healthcare, education, public transport, sanitary napkins, hearing aid parts and agricultural services.

She praised the GST system for simplifying complexities and helping millions of small taxpayers and SMEs through quarterly returns with a monthly payment schedule.

Meanwhile, the Finance Minister administered oath to Justice Sanjaya Kumar Mishra as Chairman of the GST Appellate Tribunal (GSTAT), describing this as the second milestone after GST collections crossed the Rs 2 trillion mark in April.

First print: May 6, 2024 | 9:54 PM IST