Finance Minister Nirmala Sitharaman announced on Monday that the implementation of the Goods and Services Tax (GST) in India has significantly improved tax buoyancy. She highlighted that the tax buoyancy rate, which measures the change in tax revenue compared to the change in nominal GDP, has increased from 0.72 before the introduction of GST to 1.22 during the period of 2018-23. This improvement is noteworthy as it demonstrates the effectiveness of GST in boosting tax collections.

Sitharaman also mentioned that despite the discontinuation of compensation to the states two years ago, the tax buoyancy for states is estimated at 1.15. Without GST, the revenue from subsumed taxes from FY 2018-19 to 2023-24 would have been Rs 37.5 lakh crore. However, with the implementation of GST, the actual revenue for the states amounted to Rs 46.6 lakh crore.

The Finance Minister emphasized the pro-poor approach taken by the government in determining GST rates. Over the course of seven years since its implementation, the rates for several goods and services have been lowered. The suggested revenue neutral rate (RNR) was initially set at 15.3%, but it has been reduced to 11.6% in 2019.

Sitharaman highlighted that despite the GST rate being lower than the prescribed RNR and the impact of COVID-19 on revenues, the GST collections as a percentage of GDP have reached the levels they were prior to the implementation of GST. This indicates that the central and state governments, through efficient tax administration, have been able to collect the same revenue with a lower burden on taxpayers.

The Goods and Services Tax, launched in July 2017, replaced 17 taxes and 13 cesses with a five-tier structure. The recent achievement of monthly GST collections surpassing the Rs 2 lakh-crore mark in April and the appointment of Justice (retd) Sanjaya Kumar Mishra as the first president of the GST Appellate Tribunal (GSTAT) are an indication of the success of the GST regime.