"GST collections hit ₹2.11 lakh crore but mask geographic and structural imbalances"
Tax Buoyancy
ratio of percentage change in tax revenue to percentage change in GDP; values above 1 indicate tax growing faster than the economy
IGST (Integrated GST)
GST levied on inter-state supply of goods/services and on imports; collected by the Centre and apportioned to destination states
Goods and Services Tax (GST), introduced through the Constitution (101st Amendment) Act, 2016, replaced a fragmented indirect tax architecture comprising 17 central and state levies and 23 cesses — including Central Excise Duty, Service Tax, VAT, and Entry Tax — with a unified, destination-based, multi-stage value-added tax. The reform was designed to eliminate the cascading effect of tax-on-tax, create a single national market, and broaden the formal tax base. GST is administered jointly by the Centre and States through the GST Council, a constitutional body under Article 279A, which decides rates, exemptions, and structural reforms by consensus.
GST has three components: CGST (Central GST), SGST (State GST), and IGST (Integrated GST, levied on inter-state supply and imports). IGST collections are first credited to the Centre and then apportioned between the Centre and States based on the destination principle. The Finance Commission plays a complementary role by determining the vertical devolution of the Centre's shareable tax pool to States, making GST revenue trends directly relevant to fiscal federalism. States that were promised compensation for revenue shortfalls during the transition period (the GST Compensation Cess mechanism, which ended in 2022) now bear the full fiscal risk of GST underperformance.
Since its rollout, GST collections have grown from an average of roughly ₹90,000 crore per month in the first year to crossing ₹2 lakh crore in recent months, reflecting both economic expansion and improved compliance infrastructure. However, aggregate headline numbers have increasingly masked structural divergences in the sources and geographic distribution of this revenue.
GST is an ad valorem tax — it is levied as a percentage of the value of goods and services. This means that when prices rise (due to inflation) or when the rupee depreciates (making imports costlier in rupee terms), GST collections automatically increase even without any real expansion in economic activity. This is the concept of tax buoyancy — the ratio of percentage change in tax revenue to percentage change in GDP. A buoyancy greater than 1 is generally desirable, but only when driven by genuine output and income growth, not by price effects.
IGST on imports is a particularly sensitive indicator. It is collected at the port of entry on the customs value of imported goods, which is denominated in rupees. When the rupee depreciates, the rupee cost of the same import basket rises, automatically inflating IGST collections without any increase in import volumes. Crude oil, electronics, machinery, and chemicals — which together constitute roughly 50% of India's total imports — are especially sensitive to this exchange-rate pass-through. …
What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)'?
1.It will replace multiple taxes collected by multiple authorities and will thus create a single market in India.
2.It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves.
3.It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future.
Select the correct answer using the code given below:
Consider the following statements:
The effect of devaluation of a currency is that it necessarily
1.improves the competitiveness of the domestic exports in the foreign markets
2.increases the foreign value of domestic currency
3.improves the trade balance
Which of the above statements is/are correct?
A decrease in tax to GDP ratio of a country indicates which of the following?
1.Slowing economic growth rate
2.Less equitable distribution of national income
Select the correct answer using the code given below.
Consider the following statements regarding GST revenue trends in India:
1.IGST is levied on inter-state supply of goods and services as well as on imports.
2.A depreciation of the rupee tends to increase IGST collections from imports even if import volumes remain unchanged.
3.GST being an ad valorem tax means that higher wholesale price inflation automatically raises domestic GST collections.
Which of the statements given above is/are correct?
With reference to the GST Council of India, which of the following statements is/are correct?
1.The GST Council is a statutory body created by an Act of Parliament.
2.It is constituted under Article 279A of the Indian Constitution.
3.Decisions of the GST Council require a three-fourths majority of votes cast, with the Centre's vote weighted at one-third of total votes.
The concept of 'tax buoyancy' in the context of GST refers to:
Which of the following best explains why high GST collections driven primarily by import IGST growth may not indicate genuine economic resilience?
Assertion (A): GST is described as a destination-based tax.
Reason (R): Under GST, tax revenue accrues to the state where the goods or services are finally consumed, not where they are produced.
Which of the following is correct?
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