The Goods and Services Tax (GST) regime is an “exemplar” that reduced tax burden on people, brought ease of compliance and created an efficient federal institution with high revenue buoyancy for states, finance minister Nirmala Sitharaman said on Saturday, citing media reports calling the ₹1.6 lakh core monthly collection as the new normal.
At a separate event earlier in the day, the finance minister said that the public sector banks’ profit in the last nine years has tripled to ₹1.04 lakh crore due to initiatives taken by the government and underlined the need for continuing the momentum to fuel the economy.
Hours after the release of GST revenue figures for June at ₹1.61 lakh crore, the third highest monthly collection, and recollecting economic devastation during the pandemic, Sitharaman said it is a “completely unbelievable story of sheer dedication, commitment, and grit” of the officials who made it possible.
The finance minister was speaking on the sixth anniversary of the launch of GST in the national capital organised by the Central Board of Indirect Taxes and Customs (CBIC).
Since its launch on July 1, 2017, the GST regime strived to achieve ₹1 lakh crore monthly target for almost two financial years till 2018-19. In 2017-18, the highest revenue was collected at ₹95,633 crore in August 2017. In the next fiscal year, the ₹1 lakh crore mark was crossed only four times.
While 2019-20 saw monthly revenues crossing the figure seven times, including four consecutive months starting November 2019, the economy was hit hard in March 2020 due to the Covid-19 pandemic. The pandemic period saw a decline in revenue for seven months in row.
Then the government’s stimulus resulted in revenues crossing ₹1 lakh crore again since October 2020. Now ₹1.5 lakh crore is passé. Experts are expecting ₹1.60 lakh crore as the new normal as monthly GST collections crossed ₹1.4 lakh crore for 16 months in a row and ₹1.5 lakh crore for seven times since April 2022.
Although indirect tax revenue has increased, it has reduced tax burden on the people, Sitharaman said. On many common-use items, tax under GST has been lower compared to pre-GST tax rates, she said, giving examples of items like tea, milk powder, sugar, edible vegetable oils, spices and footwear. These items attracted tax rates ranging from 6% to 10% before the GST regime. The new system reduced tax rates to 5%, she said.
Sitharaman read a long list of items tax incidence reduced in the GST regime as compared to the previous system. The products included items of common use such as hair oil, toothpaste, soaps, perfumes, detergents (average pre-GST tax burden was almost 28% that was brought down to 18% under the GST regime).
Many common-use items and services have been exempted from GST altogether, such as food products when not sold pre-packaged and labelled, like rice, wheat, flour, and curd, and services pertaining to healthcare, educational, public transportation and agricultural, she said.
The GST regime is a robust and efficient federal institution that takes decisions on the principle of cooperative federalism, she said. Out of 49 meetings, except for one issue, all decisions were taken unanimously, she added.
The instance pertains to the voting on a matter of levying a uniform tax on both state-run and state-authorised lottery at the 38th meeting off the GST Council in December 2019.
Without naming any particular person, Sitharaman condemned attempts of some opposition leaders who tried to vilify the GST regime by terming it “Gabbar Singh Tax” and calling it antithetical to the interests of states. “I want to underline the fact that despite all the campaigns, which have been against the GST and the GST Council, it has been a superlative federal (body) reflective of the federal spirit of this country,” she said. “So that is very important for us to carry forward or work in the future as well.”
The finance minister said GST has also increased revenue buoyancy of states. “Before GST, states tax growth was only 8.3%, while GDP growth was 11.5%. Meaning a low buoyancy of below one (at 0.72). This means that the state’s tax revenues were growing slower than the GDP itself. That was before the GST… And, after GST, the tax growth was 12.3% while GDP growth was 9.8%, resulting in a high buoyancy of 1.22%, and I’m talking about years 2018 to 2023.”
“We have to dispel the myth that states are losing out after having joined hands for GST,” she said, adding that such negative voices are now waning because of facts are evident as revenues of both centre and states have risen.
She said the world has recognised the GST reform. People of India can feel proud that this nation’s taxation system is run more professionally, digitally, and efficiently and, as a result, it is now appreciated globally.
Earlier, inaugurating the corporate office of Punjab and Sind Bank, the minister said that banks need to “build on laurels” by following the best corporate governance principles. “Banks should not sit back and revel in success. They should follow best corporate governance practices, adhere to regulatory norms, ensure prudent liquidity management, and continue to focus on having robust asset-liability and risk management,” she said, stressing that the Indian economy has moved away from the ‘twin balance sheet problem’ to ‘twin balance sheet advantage’.