The Goods and Services Tax (GST) is an important source of revenue for the government of India. The collections from GST reflect the economic activities across the country and provide an understanding of the government’s fiscal condition. There has been a significant surge in GST collections of October 2023, which saw a 13% rise in collections Year-on-Year.
This was the second-highest recorded GST since July 2017. The article moves towards understanding the impact on government finances by carefully studying state-by-state GST revenue growth and an analysis of the variables contributing to this increase.
Latest GST Numbers
The overall GST collections for October 2023 were 1.72 lakh crore, representing a 13% rise year on year (YoY). This increase shows good economic growth and indicates the presence of a strong legal system. The average monthly GST collections from April to October 2023 were ₹1.66 lakh crore, showing an 11.4% increase from the monthly average of the same period in the previous year.
The Central Goods and Services Tax (CGST) collections stood at ₹30,062 crore, while the State Goods and Services Tax (SGST) collections were recorded at ₹38,171 crore. The Integrated Goods and Services Tax (IGST), including inter-state transactions and imports, contributed a significant ₹91,315 crore to the total collections. Additionally, the cess collections, charged on specific goods and services, amounted to ₹12,456 crore.
The Reasons Behind The Increase in GST Collections
One of the main reasons for the increase in GST collections in October 2023 was the increased consumer spending during the festival season. In India, festivals are a time of increased consumer expenditure as people buy goods and services, be it electronics, automobiles, or clothing. During this period, there is a significant rise in retail sales which, in turn, leads to higher GST collections.
The government’s strict anti-tax evasion methods have helped guarantee better compliance and, as a result, larger GST payments. The government has been able to fix loopholes and ensure that a greater portion of the tax due is collected using various techniques such as the e-way bill, the construction of strong IT systems, and regular audits.
The revenue from domestic transactions, including the import of services, recorded a significant increase, leading to a higher GST collection. With the economy improving and businesses starting activities, the amount of domestic transactions has increased noticeably.
State-wise GST Revenue Growth
The state-wise growth in Goods and Services Tax (GST) revenue for the month of April 2023 shows the varied economic performance across different states and union territories in India. Here is a breakdown
In April 2023, certain states revealed remarkable growth in GST collections. For instance, Jammu and Kashmir showed a growth of 44%, Sikkim at 61%, and Mizoram at 53%. These huge growth rates, though on a smaller economic base, are a sign of an upward trajectory in economic activities within these regions.
The major economic hubs of India such as Maharashtra, Karnataka, and Uttar Pradesh also showed strong growth in GST collections with rates of 21%, 23%, and 21% respectively. However, some states exhibited moderate growth in GST collections. Rajasthan showed a growth of 5%, Gujarat at 4%, and Chandigarh at 2%.
What Does This Mean for Government Finances?
The increase in GST collection immediately increases government revenue. This additional money is beneficial to the government since it allows for increased spending on critical sectors. Public goods and services, infrastructure development, and social welfare schemes are examples of these domains. Increased expenditure in these sectors not only improves people’s lives but also promotes economic growth and development.
Increased money from GST collects puts the government in a better position to pay off its debt. Debt servicing refers to the payment of principal and interest on the government’s outstanding debt. Timely debt servicing is critical for maintaining fiscal stability and maintaining the country’s credit ratings on international platforms.
The fiscal deficit is the difference between the government’s total income and its total expenditure. A surge in GST collections helps in reducing this deficit by increasing the government’s total income. A lower fiscal deficit is often seen as a sign of economic stability and careful fiscal management