All states will get the benefit of GST, the country’s largest bank assured

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States will benefit from GST

Before the GST Council meeting, the State Bank of India has assured all the states that they will benefit from GST rationalization. SBI said that the rate cut will increase the GSAT collection. Also, the states who will also suffer losses will be given money from the compensation funds.

The government bank said that this will be due to the way of sharing GST revenue. The bank said that first of all, the GST is divided equally between the center and the states, with each getting 50% of the collection. Second, under tax transfer, 41% of the Center is returned to the states. The simple debate of this is that if a tax of Rs 100 is being raised by the central government, then about 70.5 rupees are given to the states.

States will benefit big

SBI said that we estimate that states will get 10 lakh crore from State GST and about 4.1 lakh crore rupees for the money given to the states from the Center. SBI said that the tax collection does not reduce by making GST rates easier and rational in India. Initially, a little revenue may be reduced, but later there is a significant increase in it. For example, changes in July 2018 and October 2019 show that by reducing tax rates, initially 3-4% can be reduced by about Rs 5,000 crore or Rs 60,000 crore annually. But after this, there is usually a rapid rise in revenue with an increase of 5-6% every month.

Short-term and long-term effects

  1. Short-Term Effect- After the reduction in GST rates, there is a slight decline in revenue in the initial months. For example, a reduction in tax collection of -3.05% in November 2018, -2.98% in December 2018, -3.80% in July 2019 and 6.40% in September 2019.
  2. Long-Term Effect- At the same time, revenue improves with time and increases. Such as 8.21% in January 2019, 9.59% in March 2019, 6.84% in April 2019 and 8.50% in November 2019. Overall, it provides additional revenue of around ₹ 1 trillion annually.
  3. Structural significance- Randnessing GST rates is not just a way to give economic boosts for shorter time. Its real advantage is to easier the tax system, reduce the burden of compliance and give people voluntarily to pay tax. This increases the tax base. Equipping GST is part of the government’s long -term strategies that insist on increasing revenue and improving economic efficiency.

SBI said that changing GST rates is not a temporary measure, but a major structural reform. This proves beneficial for the government’s revenue and the entire economic health for a long time.

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