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GST Collections

  • 05 Apr 2022
  • 3 min read

Why in News?

Gross collections of Goods and Services Tax (GST) rose to Rs 1.42 lakh crore in March 2022 (for sales in February), which is a 14.7% rise from March 2021 and a 45.6% spike from March 2020.

What are the reasons for the Rise of the GST?

  • The sharp surge has come on the back of anti-evasion measures, “especially action against fake billers”, and a pick-up in economic activity.
  • Rate rationalization measures undertaken by the GST Council to correct 'inverted duty structure'.
    • Inverted Tax Structure refers to a situation where the rate of tax, that is GST, on inputs is higher than the rate of tax on output supplies or finished goods.
  • Economic recovery and increased domestic consumption.
    • The total number of e-way bills generated in February was 6.91 crore, higher than 6.88 crore seen a month ago, despite it being a shorter month, which indicates the “recovery of business activity at faster pace”.

What is Goods and Services Tax?

  • GST was introduced through the 101st Constitution Amendment Act, 2016.
  • It is one of the biggest indirect tax reforms in the country.
    • It was introduced with the slogan of ‘One Nation One Tax’.
  • The GST has subsumed indirect taxes like excise duty, Value Added Tax (VAT), service tax, luxury tax etc.
  • It is essentially a consumption tax and is levied at the final consumption point.
  • This has helped mitigate the double taxation, cascading effect of taxes, multiplicity of taxes, classification issues etc., and has led to a common national market.
  • The GST that a merchant pays to procure goods or services (i.e. on inputs) can be set off later against the tax applicable on supply of final goods and services.
    • The set off tax is called input tax credit.
  • The GST avoids the cascading effect or tax on tax which increases the tax burden on the end consumer.
  • Tax Structure under GST:
    • Central GST to cover Excise duty, Service tax etc,
    • State GST to cover VAT, luxury tax etc.
    • Integrated GST (IGST) to cover inter-state trade.
      • IGST per se is not a tax but a system to coordinate state and union taxes.
    • It has a 4-tier tax structure for all goods and services under the slabs- 5%, 12%, 18% and 28%.

Source: IE

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