Finance Minister Nirmala Sitharaman recently addressed misconceptions regarding GST collections, shedding light on the distribution of GST revenue between the Centre and states. She clarified that states receive a substantial share of GST revenue, with 100 per cent of the state GST (SGST) collected within the state, around 50 per cent of the integrated GST (IGST), and 42 per cent of central GST (CGST) through devolution based on the Finance Commission’s recommendations. Sitharaman emphasized that contrary to popular belief, the Centre does not retain all GST revenue, with states benefiting significantly from the tax collections.
In her communication, Sitharaman dispelled the notion that GST has solely favored the Centre, presenting data to support her argument. She highlighted the improvement in tax buoyancy from 0.72 (pre-GST) to 1.22 in 2018-23, showcasing the positive impact of GST on overall revenue generation. The Finance Minister also pointed out that despite the end of compensation to states, their revenues have remained buoyant at 1.15, indicating the effectiveness of GST in boosting state finances.
Furthermore, Sitharaman detailed how GST has contributed to the fiscal landscape of the country, with collections exceeding Rs 2 lakh crore as a result of increased economic activity. She underscored the cooperative federalism aspect of GST, noting its role in empowering states and improving tax buoyancy. The Finance Minister also highlighted the downward trend in the effective weighted average GST rate over the years, demonstrating a commitment to progressive tax policies and ensuring benefits for consumers.