Finance Minister Nirmala Sitharaman highlighted the government’s pro-poor GST approach, noting that despite lower tax rates, revenues as a percentage of GDP have returned to pre-GST levels. In a post on X (formerly Twitter), Sitharaman stated that without GST, states’ revenue from subsumed taxes from FY 2018-19 to 2023-24 would have been Rs 37.5 lakh crore. With GST, states’ actual revenue amounted to Rs 46.56 lakh crore.
Although the GST rate is lower than the prescribed Revenue Neutral Rate and COVID-19 has impacted revenues, GST collections (as a percentage of GDP) have returned to pre-GST levels.
“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,” she said.
GST, introduced on July 1, 2017, replaced 17 taxes and 13 cesses with a simplified 5-tier structure. It raised the turnover threshold for registration and reduced paperwork significantly. Sitharaman discussed GST’s origins, streamlining of the tax system, and its pro-poor benefits, highlighting its role in cooperative federalism.
The minister highlighted GST’s improved tax buoyancy from 0.72 (pre-GST) to 1.22 (2018-23). State revenues remain strong at 1.15 despite compensation ending. She noted a declining effective GST rate, reflecting a pro-poor approach, with rates falling from 14.4% in 2017 to 11.6% in 2019. Sitharaman credited the idea of GST to the Atal Bihari Vajpayee-led NDA government and commended PM Modi for building consensus and passing GST Acts in 2016, which the UPA couldn’t achieve in 10 years.
Sitharaman noted GST exemptions for essential items like unbranded food, life-saving drugs, healthcare, education, and more. Addressing concerns about GST revenue distribution, she debunked the myth that the Centre retains all GST collections. States receive all SGST and about half of IGST collected, plus 42% of CGST as per Finance Commission recommendations.