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The goods and services tax (GST) system has more or less stabilised, which is evident from the steady increase in its collections over its seven-year journey.
However, the system still faces a range of challenges that relate to conflicting orders by the statelevel authorities for advance ruling (AARS), delay in setting up appeal mechanisms against these rulings, and an increasing number of litigations.
With enhanced revenues from GST, one expects that the stage is set for shifting towards GST 2.0. However, reforms such as rationalising rates and including petrol and diesel in its fold may take some time to materialise.
Average monthly GST collection rose from ₹90,000 crore during the first year of its implementation-2017-18 (AugMarch) to 1.68 trillion during 2023-24, representing 87 per cent rise.
One may argue that these figures are in current prices and do not adjust for inflation. As such these numbers do not present the reality correctly.
To address this concern, one should take GST as a proportion of the gross domestic product (GDP).
This proportion also rose from 6.23 per cent during the first full year of GST implementation to 6.83 per cent during 2023-24.
One may argue that this proportion was still not as high. This may be so because revenue-generating items such as petrol and diesel do not form part of GST as yet.
While the Centre is in favour of these two fuels coming within the ambit of GST, states are reluctant.
States' revenues from sales tax/VAT from petroleum constituted 16-17 per cent of their own tax revenues for the last five years till 2022-23.
For the Centre too, they are a big source of important tax revenues, accounting for at least 9.15 per cent before devolution to the states during the last six years till 2023-24. The share has drastically reduced from the peak of 19.3 per cent in 2020-21 due to cut in cess and excise duties.
This story is from the June 28, 2024 edition of Business Standard.
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This story is from the June 28, 2024 edition of Business Standard.
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