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GST Fuels State Revenue Surge Post-2017
29 Jul
Summary
- GST significantly boosted state tax revenue and buoyancy since its 2017 implementation.
- Maharashtra secured the highest share in state taxes post-GST due to strong consumption.
- Tax buoyancy for 26 states increased to 2.9 post-GST, up from 0.6 previously.
Since its introduction on July 1, 2017, the Goods and Services Tax (GST) has demonstrably enhanced state governments' tax revenue and buoyancy across India. This consolidated tax regime replaced 17 different taxes and 13 cesses, simplifying the indirect taxation landscape.
Analysis by India Ratings and Research (Ind-Ra) reveals a notable increase in tax buoyancy for 26 studied states, rising to 2.9 during FY18-FY26, a substantial leap from 0.6 in FY14-FY17. This improvement is attributed to the shift to a destination-based consumption tax, the inclusion of services, and better tax leakage management.
Maharashtra, benefiting from high domestic consumption and a significant services sector, maintained its leading position, increasing its share in state taxes to 20.4% during FY18-FY26 from 17.6% in FY13-FY17. The overall taxpayer base also expanded significantly, underscoring the formalization of the Indian economy.
