An in-depth analysis of GST collections reveals significant variations in growth rates among states, influenced by factors such as population, capital expenditure, consumption patterns, and compliance initiatives. As the economy stabilizes post-COVID, the GST system is gaining momentum, with certain states outperforming others in SGST (State Goods and Services Tax) collections.
High Performers in SGST Collections
States like Madhya Pradesh, Uttar Pradesh, Telangana, and Maharashtra have exhibited remarkable growth in their SGST collections. These states benefit from larger populations, increased capital expenditure, and higher consumption of luxury goods.
- Madhya Pradesh recorded the highest year-on-year SGST growth of 19.53% in FY24, up from 15.93% in FY23. The state’s substantial 97% increase in capital expenditure, coupled with its large population and advancing economic formalization, has driven this growth.
- Uttar Pradesh saw an 18.88% growth in FY24, a significant rise from 15.15% in FY23. With the highest population among states, its shift towards higher-value goods consumption has boosted tax collections. Notably, Uttar Pradesh ranked sixth in four-wheeler purchases in FY24, contributing to the higher GST from these luxury items.
- Telangana reported an 18.58% growth in FY24, improving from 15.57% in FY23.
- Maharashtra achieved a 17.9% growth in FY24, with actual SGST collections reaching ₹1 lakh crore, demonstrating its robust economic activity.
Lagging States in SGST Growth
In contrast, states like Gujarat, Tamil Nadu, Andhra Pradesh, Kerala, Haryana, and Karnataka recorded growth rates below the national average of 15%.
Factors Influencing SGST Collections
Abhishek Jain, Partner & National Head of Indirect Tax at KPMG, emphasizes that multiple factors contribute to variations in SGST collections. Since GST is consumption-based, changes in consumption patterns, economic purchasing power, and population size are critical. Additionally, state-specific government policies and regulations can trigger significant investments and influence tax collection rates.
The Impact of Compliance and Urbanization
Pune-based Chartered Accountant and tax expert Pritam Mahure highlights the role of compliance initiatives in boosting SGST collections. States implementing rapid tax compliance measures and mandatory e-invoicing have seen substantial increases in GST collections.
Urbanization also plays a crucial role. Densely populated but less urbanized states may still achieve tax collection levels comparable to fully urbanized states with smaller populations due to their exposure to luxury goods, which are taxed at higher rates.
Conclusion
The analysis of GST collections by businessline underscores the diverse factors impacting state-wise SGST growth rates. While larger populations, increased capital expenditures, and higher consumption of luxury goods drive growth in some states, compliance initiatives and urbanization significantly influence others. Understanding these dynamics is essential for policymakers aiming to optimize tax collections and foster economic growth.