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Finance Minister praises GST and says GST has increased Revenue


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Finance Minister Nirmala Sitharaman recently emphasized the government’s pro-poor approach in implementing the Goods and Services Tax (GST) in India. Despite lower tax rates, the revenues as a percentage of GDP have reached the pre-GST level. Sitharaman shared this information in a post on social media platform X (formerly Twitter).

Impact of GST on State Revenues

Sitharaman explained that without GST, the revenue from subsumed taxes for states from FY 2018-19 to 2023-24 would have been ₹37.5 lakh crore. However, with the implementation of GST, the actual revenue for states amounted to ₹46.56 lakh crore. This demonstrates that despite the GST rate being lower than the prescribed Revenue Neutral Rate and the impact of COVID-19 on revenues, GST collections as a percentage of GDP have now reached the levels they were before GST was implemented.

Benefits of GST Implementation

Sitharaman highlighted the positive impact of GST implementation on various aspects of the tax system. The turnover threshold for registration has increased to ₹40 lakh for goods and ₹20 lakh for services, simplifying the tax regime. Additionally, GST has reduced the number of tax submissions across states from 495 to just 12. These measures have streamlined the indirect tax system and improved tax buoyancy.

Lower Taxes on Essential Items and Services

GST has also resulted in lower taxes on essential items and services. For example, common items like hair oil and soaps saw a tax cut from 28% to 18%. Electrical appliances are now taxed at 12% compared to the previous rate of 31.5%. Movie tickets also saw a reduction in tax rates. Furthermore, the National Anti-profiteering Authority ensures that companies pass on the benefits of reduced taxes to consumers.

Cooperative and Fiscal Federalism

Sitharaman emphasized that GST exemplifies cooperative federalism in India and empowers states. The effective weighted average GST rate has consistently fallen since 2017, reflecting a pro-poor approach. The Revenue Neutral Rate, which was suggested to be 15.3%, was lower at 14.4% in 2017 and has further decreased to 11.6% in 2019. Sitharaman debunked the myth that all GST collections are pocketed by the Centre, stating that GST significantly contributes to state revenues. States receive 100% of the State Goods and Services Tax (SGST) collected in their respective states and a significant portion of the Central Goods and Services Tax (CGST) is devolved to the states based on the recommendations of the Finance Commission.

Milestones Achieved in GST Architecture

Sitharaman highlighted two significant milestones achieved in the larger GST architecture. First, the appointment of Justice (Retd) Sanjaya Kumar Mishra as the President of the GST Appellate Tribunal (GSTAT), which is responsible for resolving disputes related to GST. Second, gross GST collections crossed the landmark of ₹2 lakh crore in a month, thanks to heightened economic activity in the country.

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