GST Revenue Trends (2024–26): Collections, Rate Rationalisation & Structural Issues

 GST Revenue Trends (2024–26): Collections, Rate Rationalisation & Structural Issues

1. Why in News?

During 2024–26:

  • GST collections remained consistently strong.

  • Monthly collections crossed high thresholds repeatedly.

  • Discussions intensified around:

    • Rate rationalisation

    • Simplification of slabs

    • Compensation cess phase-out

GST Council meetings gained importance amid fiscal consolidation efforts.

2. What is GST?

Goods and Services Tax (GST):

  • Indirect tax on supply of goods & services.

  • Implemented on 1 July 2017.

  • Introduced through 101st Constitutional Amendment Act, 2016.

It subsumed multiple indirect taxes like:

  • Excise duty

  • VAT

  • Service tax

  • Entry tax

3. Structure of GST

There are three main components:

1️⃣ CGST – Collected by Centre

2️⃣ SGST – Collected by States

3️⃣ IGST – On inter-state supply

4. GST Council – Key Facts

Article 279A of Constitution.

Composition:

  • Union Finance Minister (Chairperson)

  • Union MoS (Finance)

  • State Finance Ministers

Voting structure:

  • Centre: 1/3 weight

  • States combined: 2/3 weight

  • 3/4 majority required for decision

This is a classic prelim question.

5. 2024–26 Developments

1️⃣ Strong Revenue Collections

Reflecting:

  • Improved compliance

  • Digital tracking

  • Economic recovery

2️⃣ Rate Rationalisation Debate

India currently has multiple slabs:

  • 0%

  • 5%

  • 18%

  • 40%

Discussion to simplify slab structure.

3️⃣ Compensation Cess

Originally introduced to compensate states for revenue loss.

Debate over its continuation and restructuring.

6. Challenges in GST System

  • Inverted duty structure

  • Refund delays

  • Litigation issues

  • Compliance burden for MSMEs

7. Static Linkage

Difference between:

  • Direct tax vs Indirect tax

  • Ad valorem tax

  • Specific tax

Concept of:

  • Destination-based tax (GST is destination-based)

Meaning:
Tax revenue goes to consuming state.

UPSC has asked this before.

8. Economic Impact

Positive:

  • Unified national market

  • Reduction in cascading tax

  • Better tax compliance

Concerns:

  • Revenue uncertainty

  • Dependence of states

  • Fiscal federalism tensions

9. Prelims Angle

Possible traps:

  • Which Article created GST Council?

  • Voting weight of Centre?

  • GST is origin-based or destination-based?

  • IGST applicable when?

Statement-based question highly probable.

10. Mains Angle

  • Has GST strengthened cooperative federalism?

  • Rate rationalisation: growth vs equity

  • Revenue buoyancy & fiscal stability

11. RBI Grade B Angle

  • GST’s impact on formalisation

  • Tax buoyancy and fiscal deficit

  • Indirect tax and inflation

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