The Journey of One Rupee: GST’s Role in Government Finance

The Journey of One Rupee: GST’s Role in Government Finance

Introduction

Welcome to a journey of understanding how one rupee traverses through the financial landscape of the Indian Government. Let’s explore the vital role played by GST (Goods and Services Tax) in this intricate process.

Stay with us as we unravel the financial mysteries and learn how GST simplifies taxation & contributes to the nation’s progress.

GST Unveiled

• Goods and Services Tax (GST) is a comprehensive and destination-based indirect tax system that was introduced in India on July 1, 2017.
• It has replaced a multitude of central and state-level taxes, such as excise duty, service tax, VAT, and others, to create a unified and simplified tax structure.

Dual GST : GST in India is dual, administered by both the central and state governments, with two components: CGST and SGST. For interstate transactions, IGST is levied, collected by the central government and distributed to states.

              Taxable Events:   GST applies at every stage, from manufacturers to consumers,

and covers all forms of supply, including sale, transfer, rental, and more.

Destination based Tax:  GST is a destination-based tax, collected where the final consumption happens. For example, if a product is made in one state but consumed in another, the tax revenue goes to the consuming state.

Input Tax Credit:   Businesses can claim input tax credit for GST paid on inputs and services, offsetting it against their output tax liability, preventing tax cascading and promoting efficiency.

GST Rates: GST has multiple tax rates, primarily at 5%, 12%, 18%, and 28%, with exemptions for essentials like food, healthcare, and education.

Online Filing  : Businesses and individuals need to register under GST and file tax returns online via the Goods and Services Tax Network (GSTN), simplifying the process for returns, payments, and refunds.

Threshold Limits : Various threshold limits determine GST registration for businesses, with smaller businesses either exempt from GST or under a simplified compliance composition scheme

Compliance : GST compliance requires transaction records, regular return filing, and adherence to invoice rules.

GST simplified India’s tax structure, enhancing transparency, curbing tax evasion, and streamlining the tax system, profoundly impacting multiple sectors and improving the business environment

1 rupee, where does it go

Top 5 States with the highest GST collection

Since GST is a consumption-based tax, States with high consumption will naturally see more tax revenues. Uttar Pradesh being the most populous State, the consumption in any case will be more. Maharashtra, Gujarat, and Karnataka are well-developed. So, the spending power of people in these states are much higher.

Per Person GST collection

GST Collection numbers from Sep’23

• Gross GST revenue for September 2023: ₹1,62,712 crore
• CGST (Central Goods and Services Tax) collected: ₹29,818 crore
• SGST (State Goods and Services Tax) collected: ₹37,657 crore
• IGST (Integrated Goods and Services Tax) collected: ₹83,623 crore (including ₹41,145 crore from imports)
• Cess collected: ₹11,613 crore (including ₹881 crore from imports)

What does high GST collection indicate?

• Higher GST collections boost government revenue.
• This leads to financial stability and supports investment in development, infrastructure, and social welfare projects.
• The government gains flexibility for growth-oriented policies and investments.
• The estimated 10.5% nominal growth rate aligns with positive GST collections, suggesting an optimistic economic outlook.
• Strong GST collections indicate economic revival, regional growth, and fiscal strength.
• Continuous efforts to drive consumption and business activities are crucial for sustained growth and momentum in the economy.