FM Nirmala Sitharaman hails Northeast as the biggest beneficiary of GST

Posted on    26 September 2023

Finance Minister Nirmala Sitharaman has highlighted the positive impact of the Goods and Services Tax (GST) on the revenue collections of North Eastern states. During her speech at the 'Conclave 2023' event in the capital, she pointed out several ways in which the northeast region has benefited from the implementation of GST:

  • Infrastructure and Connectivity: The government has focused on infrastructure development and improved connectivity in the northeast region. This emphasis has contributed to the economic growth of the region.
  • Higher Tax Transfers: North Eastern states have received higher tax transfers from the central government as a result of the GST implementation. This has bolstered their fiscal resources.
  • Funds for Asset Creation: The states have also received funds for asset creation, which has further contributed to their economic development.
  • Improved Tax Collections: GST has led to improvements in tax collections not only in manufacturing-centric states but also in areas with lower manufacturing activities. This demonstrates that GST benefits regions with diverse economic profiles.
  • Destination-Based Tax: GST is a destination-based tax on consumption, and importing states receive the tax on inter-state trade. This shift from the pre-GST regime has been advantageous for states with limited manufacturing bases, as they benefit from Integrated GST (IGST) receipts on imports.
  • Compound Annual Revenue Growth: The northeastern states have experienced a compound annual GST revenue growth rate of 27.5% since the implementation of GST, compared to the pre-GST annual growth rate of 14.8%. This substantial increase in revenue has strengthened the states' ability to implement development programs.
  • Increased Tax Devolution: Tax devolution to the northeastern states has quadrupled between 2014 and 2023, reaching ₹5.06 trillion. This increased funding has supported the states in various developmental initiatives.
  • Interest-Free Loans for Capital Assets: Since 2020-21, the northeastern states have received ₹15,440 crore in interest-free 50-year loans for capital asset creation. This financial support has further bolstered infrastructure development in the region.

In summary, Finance Minister Nirmala Sitharaman emphasized that the northeastern states have been significant beneficiaries of the GST, with improved revenue collections, higher tax transfers, and increased funding for infrastructure and development projects. The implementation of GST has had a positive impact on the economic growth and financial stability of these states.

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