Allaying one of the major concerns expressed by Tamil Nadu in the run-up to the rollout of the Goods and Services Tax (GST) in July, the Economic Survey has stated that “the biggest tax bases still seem to be in the biggest producing States.”
Tamil Nadu’s principal objection to the GST was that manufacturing and net exporting States would suffer heavily on account of the GST, which had been designed as a destination-based consumption tax. It had also argued that the tax base would move towards consuming States, undermining tax collections of the manufacturing or producing States.
“Has this happened?” was the question raised in the Survey, which was tabled in Parliament on Monday.
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Data from the Union Finance Ministry presented State-wise distribution of the GST base and the correlation of the base with the gross State domestic product (GSDP) of the respective States. T.N. came next to Maharashtra in terms of the country’s overall GST base. Its figure was 10% and the western State’s 19%, followed by Karnataka with 9%.
As of now, there are 7.39 lakh registrants under the GST in Tamil Nadu and this represents about 90% of the existing dealers, according to a senior official of the State Commercial Taxes department.
Another table showed that each State’s share in the GST base was “almost perfectly” correlated (coefficient of 0.95) with its share in the overall GSDP.
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The key message of the Survey was that “the distribution of the GST base among States is closely linked to the size of their economies.”
The Union Finance Ministry’s document also presented another facet of the State’s economic strength by pointing out that Tamil Nadu was among the top five States which accounted for 70% of the country’s exports.