How successful GST has been after seven years since being implemented?

It has been seven years since the introduction of the goods and services tax (GST) on July 1, 2017, aimed at unifying an array of traditional state and central indirect taxes under a single umbrella system.

GST revenue peaked at a record high of Rs 20.2 trillion in 2023-24 (FY24). Growth remains above 10 per cent, although slower than before, according to data from the Centre for Monitoring Indian Economy and government releases (Chart 1).

Electronic way (e-way) bills were introduced on April 1, 2018. Since then, the number of e-way bills generated has considerably increased both intrastate and interstate, with a sharper rise in intrastate transactions. Cess collections have consistently exceeded Rs 1 trillion since 2021-22 (FY22) and continue to rise (Charts 2, 3).

Both central GST (CGST) and state GST (SGST) continue to see year-on-year growth, albeit at slightly different rates. One reason for this disparity could be the variation in collection efficiency between states and the central government. State collections have grown marginally slower than central collections (Chart 4).

The percentage share of GST in gross domestic product (GDP) provides context to this growth.

In the latest FY24 figures, GST collections were equivalent to 3.25 per cent of GDP, up from 3.08 per cent in 2018-19.

GST buoyancy declined from 1.6 in FY22 to 1.3 in FY24, reported earlier by Business Standard.

A higher GST buoyancy indicates that GST receipts grew faster than nominal GDP.

According to an analysis by rating agency CRISIL, Maharashtra, Karnataka, and Uttar Pradesh report among the highest state-wise collections. However, adjusting for population, other states perform better, indicating differing consumption patterns and spending abilities (Chart 5).

A recent study suggests that most consumer items face low or no GST taxes at all. Less than 3 per cent of consumption items attract the highest tax rate of 28 per cent (Chart 6).