As the economy settles into a steady pace of growth post-Covid, the GST system is also beginning to show traction. But some states such as Madhya Pradesh, Uttar Pradesh, Telangana and Maharashtra have managed to show a far higher growth in SGST collections thanks to their larger population, higher capex spends or higher consumption of luxury goods.

businessline analysed the SGST collection of the top 15 States based on GSDP, which account for 86 per cent of the total SGST collections by all States. While the above four States recorded growth higher than all-India growth of 15 per cent, many others such as Gujarat, Tamil Nadu, Andhra Pradesh, Kerala, Haryana and Karnataka recorded lagged, with less than 15 per cent growth.

Abhishek Jain, Partner & National Head - Indirect Tax, KPMG, said, “It is hard to pinpoint the exact reason for the growth and de-growth of a state’s GST, numerous factors can be responsible to influence tax collection rates. Since GST is a consumption-based tax, SGST rates can be influenced by the change in consumption patterns. States with higher economic purchasing power and the population are typically the factors that affect SGST collection.” He added that various other factors can also contribute to SGST like change in government policies or regulations which triggers investments in the State.

The toppers

Madhya Pradesh clocked the highest year-on-year growth of 19.53 per cent in FY24. This is higher than the 15.93 per cent growth recorded in FY23. Uttar Pradesh witnessed 18.88 per cent growth in FY24, much higher than the 15.15 per cent growth recorded in FY23. Next in order is Telangana with 18.58 per cent growth in FY24. It has had a growth rate of 15.57 per cent in FY23. The fourth in the list is Maharashtra, which has had the highest SGST collections in actual terms of ₹1-lakh crore and has clocked a growth rate of 17.9 per cent in FY24.

Madhya Pradesh has increased its capex by 97 per cent in FY24, which can explain the jump in SGST collections partially. The large population in the State and increasing formalisation of the economy could also have helped.

Uttar Pradesh has the highest population, and as the consumption upgrades to higher value goods which attract higher GST, the tax collections too can move higher. Official data show that Uttar Pradesh stands at the 6th position of States registering the highest growth in four-wheeler purchases in FY24. Higher GST of 28 per cent on four-wheelers could have helped.

Compliance factor

Pune-based Chartered Accountant and tax expert Pritam Mahure said the spike in SGST collection can also be due to a State’s sudden and rapid tax compliance initiatives, and changes in regulations of mandatory e-invoicing which brought more businesses under GST.  

 “Urbanisation plays a big role in tax collection. However, if a densely populated State is not urbanised, its tax collection will still match up to that of States that are completely urbanised and have comparatively lower populations. This is because the latter will be exposed to luxury goods which fall under a higher tax slab,” Jain adds.

(The writer is interning with businessline, Chennai. )

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