The Consumption Power of Leading States: Maharashtra, UP, Karnataka, Tamil Nadu
Maharashtra, Uttar Pradesh, Karnataka, and Tamil Nadu have emerged as the frontrunners in the consumption of imported goods, resulting in significant tax revenue from integrated GST (IGST) levied on imports and inter-state trade. Official data for FY24 up to February highlights the economic strength of these major state economies and their impact on revenue generation.
The Top Importing States
The top 10 importing states, including Gujarat, Rajasthan, Telangana, Madhya Pradesh, West Bengal, and Bihar, alongside the aforementioned leading states, collectively account for half of the IGST proceeds collected by all states on imports and inter-state trade during the first 11 months of FY24. This data is sourced from GSTN, the company responsible for processing GST returns.
On the other hand, northeastern states such as Manipur, Nagaland, Mizoram, and Sikkim, as well as Union territories like Daman and Diu and Andaman, and Nicobar Islands and Lakshadweep, report the lowest tax collections in terms of imports. This highlights their relatively weaker consumption power compared to the top-performing states.
The Impact of GST Regime
Under the GST regime, tax proceeds on inter-state trade go to the importing state, giving consuming states an advantageous position. This is in contrast to the previous regime, where the exporting state received the proceeds of central sales tax (CST) on inter-state sales. Even in the case of imports from outside the country, IGST proceeds are allocated to the state of consumption, favoring larger state economies.
Leading Revenue Generators
In the first 11 months of FY24, the top revenue-generating states based on IGST collections are as follows:
- Maharashtra: ₹44,126 crore
- Uttar Pradesh: ₹41,381 crore
- Karnataka: ₹31,922 crore
- Tamil Nadu: ₹22,340 crore
- Gujarat: ₹20,298 crore
These five states accounted for one-third of all IGST collections during the April-February period of FY24. Notably, these states also topped the total state GST collections in FY24.
Factors Influencing Tax Collections
The extent of tax collections in the GST regime is influenced by the economic strength and population of a state. Being a destination-based tax on consumption, GST takes into account the initial payment of IGST in the importing state. If goods are further supplied to end consumers in another state, the credit for the IGST already paid is used to fulfill the tax liability on that inter-state supply. Ultimately, the tax proceeds are determined by the state where consumption occurs.
The purchasing power and population count of a state play a significant role in determining revenue receipts. These leading states, such as Maharashtra, Karnataka, Uttar Pradesh, and Tamil Nadu, also top the collection of GST cess levied primarily on automobiles. High rates of cess are applicable to sports utility vehicles, aerated drinks, and tobacco.
Strong GST Collections in FY24
Both the central government and the states reported robust GST collections in FY24. Uttar Pradesh recorded a 16% increase, while Maharashtra and Karnataka each reported a 15% jump in revenue collections. Tamil Nadu witnessed a 13% improvement in revenue collections. Overall, states reported a 13% rise in GST collections in FY24, amounting to ₹8.74 trillion.
Key Takeaways
- Leading states like Maharashtra, Uttar Pradesh, Karnataka, and Tamil Nadu have significant consumption power and generate substantial tax revenue from imports and inter-state trade.
- The top 10 importing states, including Gujarat, Rajasthan, Telangana, Madhya Pradesh, West Bengal, and Bihar, contribute significantly to IGST collections.
- Consumption-based taxes under the GST regime allocate tax proceeds to the state of consumption, benefiting states with larger economies.
- Factors such as economic strength, population, and purchasing power influence tax collections.
- Maharashtra, Karnataka, Uttar Pradesh, and Tamil Nadu also lead in the collection of GST cess, especially on automobiles.
- FY24 witnessed strong GST collections, with notable growth reported by Uttar Pradesh, Maharashtra, Karnataka, and Tamil Nadu.
- The overall rise in GST collections highlights the effectiveness of the GST regime in revenue generation.
With their strong economies and thriving consumption patterns, Maharashtra, Uttar Pradesh, Karnataka, and Tamil Nadu continue to shape India’s tax landscape and contribute significantly to the country’s revenue generation.
Disclaimer:
Estabizz Fintech compiled the material in this article using the most recent Acts, Rules, Circulars, Notifications, Provisions, Press Releases, and material applicable at the time. They ensured the completeness and correctness of the material through due diligence. When using this material, users must consult the relevant, applicable legislation. The given data may change without prior notice and does not constitute professional advice. Estabizz Fintech disclaims all liability for any results from the use of this material.
