States with low tax mop-up in value-added tax regime get GST boost

New tax system benefitting consuming states more than manufacturing ones

Goods and services tax (GST) is rapidly becoming redistributive in nature, boosting the tax revenue of states that were low tax collectors in the erstwhile state value-added tax (VAT) regime. Though revenues of developed states dominate overall GST collection, their revenues are growing the slowest, according to data presented in Parliament.

Successive rate cuts and revenue shortfall have dominated the debate on GST. But as the GST system stabilises, it is showing signs of an outcome that was originally expected from it — benefitting consuming states such as Bihar and Jharkhand faster than manufacturing states such as Maharashtra and Tamil