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The Goods and Services Tax (GST) regime has reduced the tax burden on consumers with a lower tax incidence on many common use items and has increased revenue buoyancy for states and Centre, Finance Minister Nirmala Sitharaman said on Saturday.
Stating that the all-round benefits of the indirect tax regime are “exemplary”, she said GST revenue buoyancy for states has improved to 1.22 after its implementation from 0.72 before the rollout of GST.
“GST has brought in greater tax buoyancy as a result of which, more than your GSDP growth, your tax collection is growing. Therefore, both Centre and states benefit…We have to dispel this myth that states are losing out after having joined hands for GST…Today, no state suffers after GST, and that is despite Covid,” Sitharaman said at the GST Day 2023 marking six years of rollout of the indirect tax regime.
The multiplicity of taxes in the pre-GST regime resulted in a “tax-on-tax” effect, causing the same product to be taxed multiple times and hence becoming costlier for the consumers, she said. Giving a comparison of the tax rates pre- and post-GST, Sitharaman said, “GST has done justice to the consumers by bringing the rates down compared to the previous regime”.
The Finance Minister also gave figures for revenue buoyancy of states, saying that it has improved to 1.22 post-GST rollout from 0.72 in the pre-GST period. Before GST, the states’ tax revenue growth was 8.3 per cent while GDP growth was 11.5 per cent, which means a low tax buoyancy of 0.72. “This means that states’ tax revenues were growing slower than the GDP,” she said. After GST, tax growth was 12.3 per cent, while GDP growth was 9.8 per cent, resulting in a higher buoyancy of 1.22, she said. She said excluding the compensation payouts , which came to an end in June last year, states’ revenue buoyancy is 1.15, which is also higher than pre-GST phase.
Post-GST revenue buoyancy of states is much higher than pre-GST buoyancy, she said, adding that now the “quick recovery, the new normal (in the collection) all prove that states have not lost out, and on the contrary, their tax buoyancy has gone up post GST”.
Sitharaman said India’s indirect tax system was fragmented before GST was introduced, where every state was effectively a distinct market for the industry as well as the consumer.
“The introduction of GST has brought the actual tax on consumers down and in some cases, remarkably down. Despite this reality, you still have a lot of people confusing the minds of people saying ‘GST has burdened the society’. Actually not,” Sitharaman said.
GST has also made sure that only that much tax, which is genuinely due to the government, is being collected systematically without any personal level of discretion, she said, adding GST has made life easy for small businesses and easy for goods to move freely in the country.
“Whether it is common consumer, whether it is the state government, a matter of tax buoyancy, whether it is making it digital and simpler, GST stands out as an exemplar,” Sitharaman said.
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