The Goods and Services Tax (GST) system of indirect taxation across India has achieved an important milestone, according to recent assertions by the Union Finance Minister. Nirmala Sitharaman noted that overall GST collections from economic activities have matched levels seen prior to the 2017 rollout of the landmark reforms, despite facing challenges from the Covid-19 pandemic.
As a percentage of the country's Gross Domestic Product, GST revenues are now equivalent to what was obtained through the multiplicity of taxes existed in the pre-GST era. Sitharaman credited this recovery to improved tax administration by both central and state level authorities. She highlighted that this feat was achieved even with the prevailing GST rates being lower than the originally proposed Revenue Neutral Rate.
The Finance Minister drew attention to the cooperative nature of the GST framework which encourages participation between states and the center. Under the ‘One Nation, One Tax' structure, states are guaranteed compensation through apportioned shares of collections. Over 60 percent of consolidated GST income is allotted to States, either directly through their own taxes or indirectly via devolved pool amounts.
Sitharaman emphasized that contrary to misconceptions, states have significantly gained additional financial strength due to the GST system. She noted improved tax buoyancy for state budgets from 0.72 pre-GST to 1.22 currently. Even after ending compensation cess support, their independent revenues have sustained upwards at 1.15 times original levels.
The chair of GST Council also outlined the people-friendly nature of the overall tax burden, which has gradually decreased since 2017. Essential items and services continue to be either exempted or taxed at concessional rates under the reform drive aiming for simple, efficient and comprehensive indirect taxation.
With the launch of the statutory GST Appellate Tribunal, disputes around registration, refunds and other matters will now be facilitated with a dedicated mechanism. This commences following a lengthy process for establishing the appellate body since the inception of GST.
The latest affirmations reiterate the centrality of GST for both strengthened fiscal federalism as well as taxpayer convenience in India going forward. As a unified indirect tax system matures further, it maintains the delicate balance of central oversight with state autonomy on taxation affairs.
