Data Point: Regional Disparity in GST Collections

January 8, 2024

Context: Goods and Services Tax (GST) revenues data for the first nine months of 2023-24 reveal weak consumer expenditure because of uneven consumption growth across States.

Regional Disparity in State GST Collections

The National Statistical Office estimates private final consumption expenditure (PFCE) will grow 4.4% in 2023-2024, the slowest since 2002-03.
- The Private Final Consumption Expenditure (PFCE): It is the expenditure incurred by the resident households and non-profit institutions serving households (NPISH) on final consumption of goods and services, whether made within or outside the economic territory.
State GST Growth rates: Among the 20 largest States that account for nearly 97% of State GST collections, the regional disparity in consumption growth is visible.
- Gujarat (9.5%) and West Bengal (9.8%) have clocked growth in single digits.
- Odisha, Rajasthan, and Chhattisgarh have grown at rates lower than the national average of 15.2%,( being attributed to tepid rural demand due to weaker farm sector outcomes)
- States such as Madhya Pradesh, Maharashtra, Karnataka, Haryana, Uttar Pradesh, Tamil Nadu and Telangana have seen State GST revenues rise in a range of 17% to 18.8%.
Wage Growth: As per India Ratings and Research economists, it has turned marginally negative for lower-income households while rising 6.4% for their upper-income counterparts in the second quarter of this year.
- Rising Inequality: Ongoing consumption demand is skewed in favor of goods and services consumed largely by households belonging to the upper-income bracket.

About National Statistics Office (NSO)

It is the Statistics Wing of the Ministry of Statistics and Programme Implementation and consists of the Central Statistics Office (CSO) and National Sample Survey Office (NSSO).
Function:
- It prepares national accounts as well as publishes annual estimates of national product, government and private consumption expenditure, capital formation, savings, estimates of capital stock and consumption of fixed capital.

About The Goods and Service Tax Act

It was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017.
About: Goods and Service Tax (GST) is levied on the supply of goods and services and is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST is a single domestic indirect tax law for the entire country.
It replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc.

Must Read: Resolving Regional Disparities: States in South are more developed than North

News Source: The Hindu