Surge in GST collections across states paves way for stable growth ahead

New Delhi : The surge in GST collections which have crossed the Rs 2 lakh crore mark for 2023-24 reflects the strength of the Indian economy across sectors and regions of the country and augurs well for keeping the fiscal deficit in check going ahead.

Large states across the country have also registered a double-digit growth in tax collections during March which shows the depth of the Indian economy. Karnataka has clocked the highest growth rate of 26 per cent in GST collections while Maharashtra has recorded a 22 per cent rise.

A welcome development has been that the country’s largest state Uttar Pradesh has also posted a 19 per cent jump in GST collections which is at par withTamil Nadu. Haryana, home to the country’s largest car maker Maruti Suzuki has also emerged as a high performer with a 23 per cent growth in GST revenue.

MS Mani, partner Deloitte India said: “GST collection also being a barometer for economic activities, as it is a transaction based tax, it can be reasonably inferred that the growth has been across regions and sectors.”

Abhishek Jain, a partner at KPMG, said that India's strong economic growth has led to increased tax collection. The Indian economy clocked an 8.4 per cent growth rate in the October-December quarter.

Finance Minister Nirmala Sitharaman has also stated that the economy is on track to post an 8 per cent growth rate in the Jan-March quarter. The GST collections for the year are both an outcome and a strong confirmation of this robust performance.

Economists say that with the sharp increase in GST collection, the fiscal deficit will be easier to manage which makes way for a more stable growth path ahead.

A lower fiscal deficit means the government will have to borrow less which leaves more money in the banking system for big companies to borrow and invest. This in turn leads to a higher economic growth rate and the creation of more jobs. A low fiscal deficit also keeps the inflation rate in check which imparts stability to the economy.

ICRA Chief Economist Aditi Nayar said: “With the CGST collections surpassing the FY2024 RE (revised estimate) the implicit growth needed to meet the Interim Budget Estimate for FY2025 has come down to single-digits, which appears likely to be exceeded.”

Experts are also of the view that given the jump in GST collections, the government may even raise the target for GST collections when the main budget is presented after the Lok Sabha polls.