CAG Decadal Study Confirms GST Implementation Boosted State Tax Revenue Growth
A comprehensive ten-year analysis conducted by the Comptroller and Auditor General (CAG) has revealed that nearly all Indian states have experienced significant benefits from the implementation of the Goods and Services Tax (GST). The landmark tax reform has substantially enhanced states' own tax revenue collection efforts, marking a positive shift in fiscal performance across the nation.
Accelerated Growth in Post-GST Era
The detailed CAG report examined tax trends from 2013-14 through the period following GST's introduction in July 2017. The findings demonstrate a clear acceleration in revenue growth during the post-GST phase. Specifically, the average annual growth rate of states' own tax revenue was 10% during the three years preceding GST implementation (2013-14 to 2016-17). This figure increased significantly to 11.7% during the post-GST period from 2018-19 to 2023-24.
Remarkably, this growth acceleration occurred despite the severe economic disruptions caused by the COVID-19 pandemic, which significantly impacted economic activity and tax collections nationwide. The resilience of the tax system during this challenging period underscores the structural benefits of the GST framework.
State-Level Performance Variations
The CAG study identified substantial variations in performance across different states. Gujarat emerged as the standout performer, achieving the most dramatic acceleration in tax revenue growth. The state's growth rate surged from 4.6% to an impressive 12.4% following GST implementation.
Conversely, at least five states experienced deceleration in their tax revenue growth rates during the same period. These states include Telangana, Andhra Pradesh, Himachal Pradesh, Uttarakhand, and Kerala, indicating regional disparities in adapting to the new tax regime.
SGST Outperforms Overall State Tax Revenue
The report highlights that State GST (SGST) collections have generally outpaced overall state tax revenue growth since 2018-19. "Since 2018-19, the average annual growth of revenues from SGST outpaced the average annual growth of SOTR in almost all states," the CAG noted in its findings.
This trend held true for the majority of states, with only seven exceptions: Assam, Chhattisgarh, Goa, Jharkhand, Kerala, Telangana, and Tripura. In these states, overall state tax revenue growth exceeded SGST growth during the study period.
Exceptional Performers and Regional Patterns
Several regions demonstrated particularly strong performance in SGST collection growth. In five of the eight northeastern states, along with Madhya Pradesh, average annual SGST growth exceeded 17% from 2018-19 to 2023-24.
Arunachal Pradesh achieved an extraordinary milestone, recording an exceptionally high average annual SGST growth rate of 27% during this period. This remarkable performance represents one of the most significant tax revenue accelerations documented in the CAG study.
GST's Contribution to State Revenue
The CAG analysis revealed that GST now constitutes a substantial portion of states' revenue collections. The contribution of GST to states' revenue kitty ranges from 35% to 47%, establishing it as a critical component of state finances across India.
Beyond GST, states' own tax revenue includes several other significant components:
- Excise collection on liquor
- Tax on auto fuel
- Electricity taxes
- Registration of properties
- Royalties from natural resources
Challenges in Boosting Non-GST Revenue
The CAG report also addressed ongoing challenges in enhancing states' overall tax revenue performance. "States have a poor track record in boosting SOTR," the study noted, echoing concerns previously raised by the 16th Finance Commission and regularly flagged by the Reserve Bank of India in its annual assessments.
This persistent issue highlights the need for continued reforms and improved tax administration beyond the GST framework to ensure comprehensive fiscal strengthening at the state level.
The comprehensive CAG study provides valuable insights into the evolving fiscal landscape of Indian states following the implementation of GST. While challenges remain in boosting non-GST revenue sources, the overall acceleration in tax revenue growth represents a significant achievement in India's economic reform journey.
