The ratio of GST collections to GDP is increasing

Despite reports of robust goods and services tax (GST) collections, their economic contribution remains relatively modest. Gross GST collections surged by 11.5% to reach US$ 21.40 billion (Rs. 1.78 trillion) in March of the current financial year, the second-highest figure after April, which recorded US$ 22.48 billion (Rs. 1.87 trillion). Throughout the fiscal year 2023-24, gross GST collections totalled US$ 242.25 billion (Rs. 20.14 trillion), representing an 11.7% growth over the previous year's US$ 217.27 billion (Rs. 18.07 trillion). However, when considering the proportion to the size of the economy, the figures appear less impressive. According to the second advance estimates of national accounts, Gross GST collections accounted for just 6.86% of the GDP at current prices for 2023-24. While this is higher than the 6.72% recorded in the previous year, the increase is only moderate. Notably, during the COVID-19-hit year of 2020-21, the ratio fell below six percent to 5.7%, while it was 6.07% during the economic slowdown of 2019-20. Additionally, net GST to GDP ratio increased from 5.89% in 2022-23 to 6.13% in 2023-24, underscoring its significance for the government. Despite this, GST buoyancy, measuring the change in receipts relative to the change in the size of the economy, has been declining, from 1.6 in 2021-22 to 1.3 in 2023-24, albeit remaining over one for the past three years.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.