By Anjan Roy
India has landed with a bumper GST collection in April this year, indicating thereby that however much some economists had seen serious weakness in performance, domestic economy is showing a robust trend.
This year’s GST collections are roughly 20% higher than the corresponding period last year. Underlying such strong growth is the large domestic transaction growth as well as surging demand.
The breakdown of the figures show the economic performance among the states — the so called fast movers and the laggards.
Sikkim has shown the largest increase in collection in percentage terms, not in absolute size. The reason could be the increasing tendency to channel some of the trading in certain goods through that state. Some of the high duty articles used to be routed through Sikkim and some of the north eastern states to take advantage of lower rates in these states, given as concessions for remote and hilly states.
However, the GST figures show who are the leaders and star performers in the Indian economic scene. Maharashtra wins hands down with the largest revenue collections from GST at around Rs 33,200 crore in April this year. The next largest collection is in Karnataka at Rs 14,600 crore in April. Just about half the size.
Maharashtra is the principal manufacturing state in the whole country and the collections indicate this. Additionally, the state’s capital, Mumbai, is also the economic capital in the country with a massive presence in the banking and financial operations. These together would have yielded the final collection tally.
But another state, Haryana, which is otherwise not one of the larger provinces, has a major manufacturing presence and therefore its tax collections are impressive at Rs10,035 crore in April 2023.
This could be attributed to the presence of the country’s largest automobile manufacturers Maruti Suzuki Ltd. Haryana claims the manufacturing facility for Maruti Udyog and thus accounts for the massive volume of automobile GST collection. Being high value items, automobiles would have boosted the collections hugely.
Tamil Nadu as well has surged past its collections last year. Tamil Nadu has collected over Rs 11,000 crore in GST. Tamil Nadu has a diversified economy and is emerging as a centre for automobiles. Additionally, Tamil Nadu is the home state for manufacturing mobiles telephones to a host of other high technology items. It has been very successful in attracting such investments over the last decade.
It appears, all its booming tax collections represent the fast rising pace of the state’s industrialisation. At the same time, Tamil Nadu’s stronghold on its traditional industrial bases continue and flourish. Take for example, its success in traditional textiles as recently hosieries.
Tamil Nadu is all set to get fresh investments in plants manufacturing cordless telephones to sophisticated electronic items of world’s biggest manufacturer of mobile telephones. Its collections are showing a healthy clip and one can expect that the overall collections should rise fast in the coming years.
Tamil Nadu stands neck to neck with Gujarat in GST collections. The state has collected Rs 11,725 crore in 2013, just a notch more than Tamil Nadu. But while the latter has demonstrated a much faster clip, Gujarat’s collections of GST have increased by only 4% between 2022 and 2023. Is it that the state’s growth rate has fallen in recent years.
The spectacular rise in GST collections show the success of the new system of taxation, which have had equally monumental snags and glitches in the beginning. The continuous debugging and fine tuning of the IT backbone had helped in achieving the elevated operational levels.
The smoother functioning of the GST system is a pointer at the integration of the domestic market. One remembers the horrific manner of functioning of internal trade and business in the days before the GST. Goods and articles would take days to move from manufacturing points to the consumption centres, facing enormous delays at the check point between states. Demands for speed money and greasing of the palms were a nightmare for inter-state traders as well as even truckers.
Thirdly, the rising collections also indicate at the integration of the previously informal sector into the country’s formal economy. Because of the chain link in the tax system, there is an innate pressure in the operation of the GST system for the small informal parts of the supply chain to get increasingly integrated into the formal system. Eventually, when the entire GST system stabilises and spread throughout the Indian economy, the entire economy would be integrated into a single formal structure.
Fourthly, and most important for the future, I think, would be the data that the GST system should generate in real time. The disaggregated Get collection figures should be able to throw great insight into the functioning of the Indian economy. Which sectors were doing how, where are the glitches and how are the trends in manufacturing an production as well as sales points.
And then, by co-relating these figures with he overall figures of a state, like population, it should be possible to generate some indices for development of the states. These could also give insight into the per capita performances and well being.
The data use from the GST system should be an effort in the future, but these could become useful pointers even now. (IPA Service)