• Notification Date: 02-02-2023
• Notification No: N/A

Tax Collection Improved or Worsened by GST

The Union Budget 2023 has been published on 1st Feb 2023. It is to be analysed whether the shift to the Goods and Services Tax (GST) has improved or worsened the buoyancy of India's indirect tax system.  
It compares the tax collection rates before and after the implementation of the GST, as well as nominal GDP growth during both the periods.  
 
The aggregate state and central taxes subsumed in the GST exhibited a CAGR of 11.53 per cent in the pre-GST period (FY13 to FY17). The nominal GDP grew at a CAGR of 11.54 per cent during this period. Since the growth of the subsumed taxes was marginally less than the growth of GDP, the buoyancy was just below one and could be taken as one for practical purposes. 

The post-GST period experienced many headwinds, most notably the exogenous shock of the Covid pandemic. The nominal GDP grew at a slower CAGR of 9.6 percent in the post-GST years (FY19 to FY23). However, GST collections have grown at a CAGR of 10.9 percent, implying aggregate GST collections buoyancy of around 1.1. 

This has occurred even though the effective GST rate has fallen from inception (from 14.4 per cent in 2017 to 11.6 per cent in 2019, according to RBI. Improved tax collection efficiency was one of the main arguments in favour of GST. The Survey says the evidence so far suggests that GST is indeed showing a higher buoyancy than the pre-GST system.