In a setback for states, the state goods and services tax (SGST) has grown at a slower rate between 2017-18 and 2020-21 compared to growth in the preceding four years for taxes subsumed in GST, before the new indirect tax regime was introduced, a study by India Ratings showed.
In a setback for states, the state goods and services tax (SGST) has grown at a slower rate between 2017-18 and 2020-21 compared to growth in the preceding four years for taxes subsumed in GST, before the new indirect tax regime was introduced, a study by India Ratings showed.
The state GST grew by an average of 6.7% during FY18-FY21, which is significantly lower than the 9.8% growth recorded by the taxes subsumed under GST during FY14-FY17.
"We believe that the goods and services tax (GST) regime is still a work-in-progress, the data available so far does not instil confidence with respect to GST achieving or is on course to achieve its two key objectives- it boosts the tax revenue and is beneficial for the consuming states," said India Ratings and Research in a note on Monday.
Besides, the share of SGST in their own tax revenue (SOTR) at 55.4% during FY18-FY21 is nearly flat when compared with 55.2% during FY14-FY17. "It indicates that the growth in both SGST and non-SGST components of SOTR has been broadly similar. This means the GST implementation did not result in any incremental benefit to the SOTR," said India Ratings.
State-wise SGST growth trend showed that during FY19-FY22, Odisha is the only state having average SGST collection exceeding 14%. Average SGST of Odisha grew 20.06% during FY19-FY22. Bihar came next with 13.89%, followed by Assam, Andhra Pradesh and Chhattisgarh all recording average SGST collection higher than 10.0%. Remaining 17 major states recorded average SGST growth of below 10%, according to the note. In fact, Uttarakhand recorded negative average SGST growth of 4.02% during FY19-FY22.
"Therefore, GST compensation has become such an important source of revenue for states that without it the GST revenue growth of most states will not reach 14%. It is for this reason that many states are not ready to accept its discontinuation by June 2022 and are demanding an extension," said the note.
The states were promised full compensation for the first five years of introduction of GST in case of any shortfall, assuming revenue growth rate of 14% on the base year of 2015-16. The compensation period ends on June 30.