GST: Enrolment figures show inter-state disparity

As India moves closer to the goods and services tax (GST) regime, the statistics on advance registrations issued by the government paint an interesting picture on each state’s performance since the start of the advance enrolment programme in November 2016.

Implemented in a phased manner to avoid overload, the states began the process of advance enrolments to ensure a smooth transition of more than 8 million taxpayers to the new indirect tax framework, expected to come into effect from July 1. However, if government figures are anything to go by, the various states in the country are showing distinctive trends in adopting the GST regime, with disparities emerging even at this nascent stage. 

As there is no law mandating these registrations, some states are taking a more hands-on approach to these advance enrolments, which are of two kinds: Shifting already registered entities (under VAT, excise and service tax registrations) and registering fresh applications. Other states, though, seem to be taking a more wait and watch approach. 

“Some regions have been more pro-active in seeking GST enrolments as compared to others. As the data suggest, manufacturing states have done better as compared to seller (consumer) states,” says Bipin Sapra, indirect tax partner, EY.

Despite a late start, southern states have fared the best in terms of advance registrations, with Karnataka already achieving a 92.79 per cent enrolment. Only Kerala has lagged with a 60.06 per cent rate. Western and central states have also fared well, except Goa, which is at 51.77 per cent.

Rates of enrolment in the northern, eastern and north-eastern regions of the country are considerably lower. The northern state of Jammu and Kashmir has fared the worst in the lot with a paltry 0.55 per cent registration rate. Even the National Capital Territory of Delhi has put up an average performance of just 55.27 per cent. Among the eastern and north-eastern states, West Bengal has fared the best with a 67.13 per cent rate of enrolment, but the region has performed much worse.

“GST awareness is a critical factor resulting in disparities between enrolments in the various states. Historically, compliance in eastern and north-eastern states has been lower, while western and southern states, with higher levels of computer literacy, have done better,” says Sachin Menon, head, indirect tax, KPMG India.

As the laws relating to the GST framework are still being debated, experts say that many taxpayers are not feeling the urgency to make the necessary registrations. Other complexities such as service tax registrations, which are mostly central in nature, also need to be taken care of by states. This process is cumbersome and time-consuming and resulting in a lag in the enrolment uptake. According to Sapra, as the date for converting to the GST framework is finalised and there is greater clarity in the process and law, these enrolments should increase significantly.

The publication of these statistics, if nothing else, can be gauged as being a good marker of GST readiness and will surely incentivise states with lower rates of enrolments to take a greater initiative at reaching higher levels before the deadline arrives.