GST rollout boosted state tax revenues, buoyancy, says India Ratings

Goods and Services Tax implementation has boosted state governments’ tax revenue and buoyancy, and Maharashtra, with high domestic consumption and presence of large services sectors, fetched the highest share in states taxes post GST, India Ratings and Research (Ind-Ra) said on Wednesday.Rolled out on July 1, 2017, GST subsumed 17 different taxes and 13 cesses, and reduced the complexity of variable central and states taxation rates and structures.Ind-Ra in a report highlighted that since its implementation, State Goods and Services Tax (SGST) has boosted state governments’ tax revenue and buoyancy.”The tax buoyancy of 26 states studied increased to 2.9 during FY18-FY26, i.e., post GST implementation, compared to 0.6 during FY14-FY17,” Ind-Ra Economist and Director Megha Arora said.The top five states with the highest tax buoyancy, post GST implementation, are Manipur, Nagaland, Goa, Maharashtra and Sikkim, while prior to GST implementation Meghalaya, Bihar, Nagaland, Chhattisgarh, and Manipur were the top five.”One of the key reasons for this is the structural change in indirect taxation to a destination-based consumption tax from origin-based production tax, inclusion of services post GST, and plugging tax leakages,” Ind-Ra said.During FY13-FY17, the state governments’ tax revenue collection increased 6.8% to ₹3.7 lakh crore, while Gross State Domestic Product (GSDP) grew 11.6%, Ind-Ra said.The revenue from taxes during FY13-FY17 included 17 different taxes and 13 cesses that were subsumed in GST.The above data is for 26 states/UTs, for which comparative data was available from FY13-FY17. These states represent nearly 80% of the SGST collection, excluding Integrated Goods and Services Tax (IGST).Post GST implementation in FY18 until FY26, the state governments’ tax revenue (SGST) increased 9 per cent to ₹12.9 lakh crore, despite slower GSDP growth of 10.4% to ₹315.2 lakh crore.”This higher SGST growth has been due to the simplification of taxation system, incorporation of technology and analytics to ensure tax compliance, and expansion in taxpayers’ base that increased to 1.65 crore in May 2026 from 67 lakh in 2017, underlining formalisation of the Indian economy,” Ind-Ra said.Higher tax revenue indicates increased consumption, and improved monitoring and compliance, it added.The overall composition of tax revenue changed from prior to post GST implementation, except for Maharashtra and Karnataka that consistently accounted for the first and the second highest share.Though Maharashtra always remained the frontrunner, its share in states tax revenue increased to 20.4% during FY18-FY26 from 17.6% during FY13-FY17, given the high domestic consumption and presence of a large services sector, Arora said.

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