A Comparison Of How GST State Laws Differ in The 5 Top GDP Contributor States

Indian economy is tagged as developing for several decades now, and there are numerous accountable reasons for that. While the economy showcases an abundance of potential, the nation still does not seem to be tagged developed anytime soon.

Amidst the several key reasons behind the economy’s unstable growth was the traditional Indian taxation system. The original tax regime imposed countless indirect taxes on both the centre and state governments, restricting their trade capacities. This, in return, hindered the revenues of the government, leading to low GDP growth.

As the taxation system composed distinct policies and rules on different states, it was high time for a change within the regime. The same was delivered on March 29, 2017, with the introduction of Goods and Services Tax (GST.) The unified tax system has become an integral part of the Indian economy and has proven pivotal for numerous states.

Although the tax regime remains similar throughout the states, its implication affects them diversely. That is why the GST contributions of states vary vastly with some states equalling the amount of the remaining states. However, before diving into the in-depth details, here is a quick brief of what is gst in India:

GST in India

GST (Goods and Services Tax) is the unified taxation system that has replaced numerous indirect taxes throughout the nation. The regime came into effect on July 1, 2017. The tax can be defined as a destination-based, multi-stage, comprehensive tax imposed on every stage of value addition. Simply put, Goods and Services Tax is an indirect tax charged on goods and services’ supply.

GST is levied whenever a sale is made whether it is an intra-state or inter-state sales. In the case of inter-state transactions, Integrated GST is charged while in an intra-state sales, both State GST and Central GST are imposed.

Now that you got the basic gist of GST, here is an overview of the top 5 GST-generating states in India:

Comparison of Top 5 GST-Generating States in India

Almost every state except Lakshadweep and Jharkhand showed a growth in the contribution in the GST Collection in 2019. Lakshadweep’s GST contribution witnessed a decline of 78% as the union territory merely managed to accumulate one crore INR compared to its previous contribution of 4 crore INR.

The decline in GST contribution was not as significant in Jharkhand as the state showed a dip of 3% in its collection with the total contribution amounting to 1,943 crore INR.

Here are the top 5 states:

  1. Maharashtra topped the list with a contribution of 16,530 crore INR showing an increase of total 22%.
  2. The second on the list was Karnataka with a contribution of 6,886 crore INR and an increased rate of 11%.
  3. Gujarat came in third with an accumulated contribution of 6,621 crore INR and a growth rate of 18%.
  4. Tamil Nadu placed fourth on the list with a contribution amounting to 6,422 crore INR and a 19% growth rate.
  5. UP grabbed the fifth spot on the highest GST-paying states as of December 2019, with a total of 5,489 crore INR and 11% growth.

If you are looking to file GST as per your state, then you must know your own gst state code.

GST Overview

Although the majority of the states are showing growth in the GST contribution, they are still falling short of the expected numbers. Several states have lost their revenue-generating capabilities post-GST, and it is increasing inter-state disproportion as well.

2018-19 GST stats show that GST failed to garner the desired results as it fell 1 lakh crore INR short of the expected revenue set at 1,12,000 crore INR. The primary reason behind the issue lies within the states’ diminished taxation capacity.

Numerous states have released a significant portion of tax authorities, and will only be reimbursed for five years through the special cess revenues. The said are deemed inept when compared to the estimated 14% revenue progress target.

Moreover, a pattern of high GDP with high IGST and SGST collected by the Centre have been seen within some states. The pattern indicates high GST revenues in producing states instead of the consuming states, showing an utter failure of GST’s primary goal to diminish inter-state disproportion.

To Wrap Up

While GST seemed like the ultimate taxation system on the paper, its implication has produced several disarrays within the economy. The top 5 GST-paying states account for a hefty portion of the overall contribution, which is an alarming thought.

However, it is not all bad as GST has proved to be a lifesaver for numerous SMEs and sole proprietors. The taxation system is far from being perfect, but is undeniably an upgrade from its predecessor.

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