How India’s GST revenues can sustain their incline

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₹10.4 lakh to ₹13 lakh. This trend would have likely continued in assessment year 2024-25. As for GST, the GST Council’s decision in August 2023 that online gaming companies will have to pay 28% GST, up from 18%, led to a jump in revenues.

The number of GST returns filed has increased from 162.3 million in 2018-19 to 223 million in 2023-24, thanks to invoice matching, generation of e-way bills and e-invoicing. In the last five years, more than ₹4.45 trillion worth of GST evasion was detected and more than ₹1.05 trillion was recovered. More than 18 million addresses of registered businesses have been geo-coded to check bogus registrations.

Sustaining the growth in GST revenues is primarily dependent on the consumption growth momentum, which can be realized if the Indian economy stays resilient, delivers robust growth (of 7%-plus) and sees increases in the worker population ratio through the generation of earning opportunities. The Indian economy must progress towards realizing Engel elasticity, which is a measure of the sensitivity of demand to a change in income. The generation of additional income-earning opportunities to lift the worker population ratio isn’t sufficient; opportunities must be created in more productive manufacturing and services sectors.

Additionally, the focus of the Modi government must remain on improving the ease of doing business and generating formal jobs. Addressing high youth unemployment, as attempted in Union Budget 2024, would also provide a fillip to consumption. Rate rationalisation and the inclusion of excluded commodities like petroleum products in GST are other policy actions that can spur consumption.