![Using GST as consumption proxy](https://cdn.magzter.com/1547192204/1717440504/articles/bDHzvDE9VAcgyfZYev7sys/USING-GST-AS-CONSUMPTION-PROXY.jpg)
Last financial year, net goods and services tax (GST) collections (gross collections minus refunds) surged 13.4 per cent, outpacing the 9.6 per cent growth in nominal gross domestic product (GDP).
This financial year has also started strong, with the gross April mop-up soaring to record ₹2.1 trillion, the highest monthly haul since the levy was introduced in July 2017. The data spawned by this collection ecosystem has another, unintended benefit. It can throw light on private consumption, including at the state level.
GST is a consumption-based tax, accruing to the state where goods are consumed, as opposed to where they are produced. So, state-level GST data can indicate sub-national private consumption trends.
While private consumption is the biggest driver of demand in the Indian economy, the lack of high-frequency data on it makes monitoring a challenge. Interestingly, despite strong GST collection in FY24, the National Statistical Office's estimates show private consumption growth has trailed GDP growth.
This divergence could be because, in addition to consumption, formalisation and improved compliance are playing an important role in shaping GST collections. The number of registered GST taxpayers reached 15 million as of April 30, 2024, more than twice the 7 million in 2017. Compliance has improved as well. For instance, recently, evasions of more than ₹44,000 crore were detected between May 2023 and January 2024 under a government drive to crack down on non-existent registrations and fake invoices.
The collection-consumption tango
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