The Goods and Services Tax (GST) has not assisted states in meeting their primary goal of increasing tax revenue, according to India Ratings. The rating agency said, there have been no benefits to states in the five years since the implementation of GST.
The Centre will no longer compensate states for tax collection shortfalls beginning in June of this year. GST compensation for a five-year period was part of the agreement reached between states and the central government when the new indirect tax regime went into effect in 2017.
Several states have requested that the GST compensation be extended. However, in presenting the FY23 Budget, Finance Minister Nirmala Sitharaman stated that the compensation period will not be extended beyond June 2022. "...the data available thus far does not instil confidence that GST has achieved or is on track to achieve its two key objectives, namely that it increases tax revenue and benefits consuming states," the rating agency said.
The share of state GST (SGST) in States' Own Tax Revenue (SOTR) at 55.4 percent during FY18-FY21 compared to 55.2 percent during FY14-FY17 indicates that growth in both the SGST and non-SGST components of SOTR has been broadly similar, the report said.
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