Minimal Variation in GST Mop-Up Across States Despite Income Disparities: Crisil
While per capita GST, a proxy for per capita consumption expenditure, is higher in richer states, the growth in GST collections appears unrelated to the state's income level, the rating agency said.
Despite vast income disparities across states, there is minimal variation in the goods and services tax collections, according to a recent Crisil report.
While per capita GST, a proxy for per capita consumption expenditure, is higher in richer states, the growth in GST collections appears unrelated to the state's income level, the rating agency said.
For instance, the average GST growth during the five-year period, i.e., between fiscal 2020 and 2024 in Telangana — with the highest per capita income at Rs 3,44,219 — stood at 14.7%, not much different from the 15.6% growth in Bihar, which has the lowest per capita income at Rs 59,639.
Maharashtra, Karnataka and Uttar Pradesh accounted for the highest share of pan-India GST collections in fiscal 2024, while Punjab, Chhattisgarh and Jharkhand had the lowest.
Indeed, the top three states not only have the largest GDP size but also boast a large population that seems to buttress their consumption expenditure. However, by normalising the GST data with the population size, one gets a sense of the average consumption spend per individual.
When looked at through the per capita lens, Uttar Pradesh, West Bengal and Rajasthan get pushed down the order, while Haryana, Telangana, Kerala and Punjab move up, according to Crisil's analysis of GST data for 17 states that account for 95% of the total GST collections.
Broadly, Maharashtra, Karnataka and Haryana are the top three states with the highest per capita consumption spend, while Bihar, Uttar Pradesh and Jharkhand have the lowest. Maharashtra, the third-most populous state, tops the GST collections ranking in both absolute and per capita terms.
Such a trend suggests that there are other factors at play influencing GST collection growth. One possible reason could be that urban areas have better compliance than rural areas, and, hence, states with a higher urban share show higher per capita GST collections, according to Crisil.
States Behind Lower Consumption Growth
Even as India’s real GDP growth surprised on the upside at 7.6% in fiscal 2024, up from 7% in fiscal 2023, consumption growth lagged. The growth in private final consumption expenditure was much lower at 3% versus 6.8%.
In nominal terms, too, PFCE growth of 7.9% in fiscal 2024 compared with 14.2% in fiscal 2023 lagged overall GDP growth of 9.1%.
Slower consumption this fiscal, however, is not a pan-India phenomenon. For instance, while West Bengal saw only 11.5% growth in GST collections, it was 28.8% for Odisha on the other end of the spectrum, stated Crisil.
The average all-India GST growth in fiscal 2024 (April-February) was 17.3% year-on-year. But nine states experienced lower growth during this period.
The weakest GST growth states include West Bengal, Jharkhand and Kerala, and the strongest were Odisha, Madhya Pradesh and Uttar Pradesh.