GST is vital revenue source for central and state governments, increase in 24.8% of gross GST collections: Economic Survey 2023

As per the Report of the Economic Survey, 2023, the Goods and Services Tax ( GST ) has evolved and stabilised as a vital revenue source for central and state government, thus implying a YoY growth of 24.8 per cent.

The gross GST collections, taken together, were Rs 13.40 lakh crore from April to December 2022. The pick-up in GST collections was consistently spread across all the months during the current fiscal year, with an average monthly collection of Rs 1.5 lakh crore.

According to the Survey the improvement in GST collections has been due to the combined effect of therapid economic recovery post-pandemic, the nationwide drive against GST evaders and fake bills along with many systemic changes introduced recently, and various rate rationalisation measures undertaken by the GST Council to correct inverted duty structure.

Consistent efforts have resulted in a doubling of the GST net, with the number of GST taxpayers increasing from nearly 70 lakh in 20172 to more than 1.4 crore in 2022. Apart from directly supporting government revenues, GST has led to better reporting of income, which in turn has positive externalities for income tax collection and economic activity.

The post-GST period experienced many headwinds, most notably the exogenous shock of the Covid pandemic. The nominal GDP grew at a slower CAGR of 9.6 per cent in the post-GST years (FY19 to FY23).

However, GST collections have grown at a CAGR of 10.9 per cent, implying aggregate GST collections buoyancy of around 1.1. This has occurred even though the effective GST rate has fallen from inception (from 14.4 per cent in 2017 to 11.6 per cent in 2019, according to RBI).

“Improved tax collection efficiency was one of the main arguments in favour of GST. The evidence so far suggests that GST is indeed showing a higher buoyancy than the pre-GST system. This augurs well for future resource mobilisation in the economy” The Survey said.

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