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Govt adopted pro-poor approach in GST implementation, revenues reached pre-GST levels: Sitharaman
May-07-2024

Finance Minister Nirmala Sitharaman has said that the government has adopted ‘a pro-poor approach’ while implementing Goods and Services Tax (GST), and despite lower taxes rates the revenues as a percentage of GDP have reached the pre-GST level. She said without GST, states' revenue from subsumed taxes from FY 2018-19 to 2023-24 would have been Rs 37.5 lakh crore. With GST, states' actual revenue amounted to Rs 46.56 lakh crore. 

Despite the GST rate being less than the prescribed Revenue Neutral Rate and COVID-19 affecting the revenues, GST collections (as a percentage of GDP) have now reached the levels they were before GST (both net and gross). This demonstrates that the Centre & States, collectively, through better tax administration, are able to collect the same revenue with a lower burden on taxpayers. GST, which was rolled out on July 1, 2017, had subsumed 17 taxes and 13 cesses into a 5-tier structure, thereby simplifying the tax regime. The turnover threshold for registration rose to Rs 40 lakh for goods and Rs 20 lakh for services (from Rs 5 lakh on average under VAT). GST also reduced 495 different submissions (challan, forms, declarations, etc) across states to just 12. 

The minister said GST has improved tax buoyancy from 0.72 (pre-GST) to 1.22 (2018-23). Despite compensation ending, state revenues remain buoyant at 1.15. Reflecting a pro-poor approach, the effective weighted average GST rate has consistently fallen since 2017. The Revenue Neutral Rate was suggested to be 15.3 per cent but was lower at 14.4 per cent in 2017, and it has come down to 11.6 per cent in 2019.


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