GST Collections & Performances of States 

Syllabus: GS3/Economy

In News

• In October 2025, India’s GST collections rose to ₹1.95 lakh crore, a 4.6% increase over the previous year, driven partly by Diwali-related spending. 

What is the Goods and Services Tax (GST)?

• The GST refers to India’s indirect tax regime, introduced in 2017.
• It is a destination-based tax on the consumption of goods and services. 
• It is levied at every stage of production and distribution, but tax is charged only on the value added at each stage, with credits available for taxes paid earlier.
• Ultimately, the final consumer bears the tax, and revenue goes to the authority where the goods or services are consumed (place of supply).

Benefits 

• The introduction of GST marks a major indirect tax reform in India by unifying multiple Central and State taxes into a single system, reducing tax cascading and fostering a common national market. 
• It lowers the overall tax burden on goods, enhances competitiveness of Indian products both domestically and globally.
• It is expected to boost economic growth and it may increase revenues for both Centre and States through a broader tax base, higher trade volumes, and better compliance.
•  Its transparency also simplifies administration.

Issues

• Revenue Shortfalls: According to PRS Legislative Research, GST revenues remain below pre-GST levels, with the GST-to-GDP ratio falling from 6.5% in 2015–16 to 5.5% in 2023–24.
• State-Level Disparities: Industrial and service-driven states—Maharashtra, Karnataka, Gujarat, Tamil Nadu, and Haryana—accounted for over 40% of the total revenue.
  • However, 20 states and UTs saw a contraction in GST receipts. 
  • While most states experienced declines, five northeastern states—Mizoram, Nagaland, Sikkim, Meghalaya, and Manipur—improved their tax-to-GSDP ratios, whereas Punjab, Chhattisgarh, Karnataka, Madhya Pradesh, and Odisha saw the steepest drops.
• Complex Rate Structure: Despite slab rationalisation, classification disputes and high rates on select goods persist.
• Post-Compensation Challenges: The end of GST compensation has reignited concerns over fiscal autonomy for states.

Conclusion and Way Ahead

• GST continues to be a foundational pillar of India’s economic reform, but realising its full potential requires addressing key structural challenges.
• This includes simplifying the tax structure through rate rationalisation and fewer exemptions, strengthening state revenues via improved SGST mechanisms and equitable sharing, enhancing enforcement through digital and AI-driven compliance tools, and reinforcing the institutional capacity of the GST Council for effective decision-making and dispute resolution.

Source :IE