The genesis of Goods and Services Tax (GST) in India on July 1, 2017 is the aftermath of repeals and amalgamation of the various State jurisdictional tax revenue sources from value added tax, central sales tax, lottery tax, luxury tax, entry tax, advertisement tax and entertainment tax. By design what the State mobilizes as GST from goods and services reflect the consumption within the economy. By analyzing the commodity and service level data from the tax returns this article explores the State's GST revenue from the final consumption.

Classifying taxpayers on the basis of commodity and service groups and collating the required data from the Goods and Services Tax Network (GSTN) is challenging. The Kerala State GST Department in association with Indian Institute of Information Technology and Management-Kerala (IIITM-K] undertook a detailed analysis of the tax return at the Sectoral level. To begin with the State GST Department made a sectoral classification of goods into 66 and service into 27 sectors using various data sets from returns submitted. Subsequently, they were grouped into 16 commodity groups (goods) and 12 services groups for the purpose of this study. (Refer Box -1 for details). The analysis would not be complete without mentioning the fact that some of the goods and services in the consumption basket are exempt from GST, as such these transactions generally does not get reported to the GST system. These include fresh fruits and vegetables, cereals, meat and fish, edible tubers and roots, coconut, tea leaves, coffee beans, milk and allied products, charcoal and firewood, agricultural tools, organic manure, live animals, plants, vaccines, newspapers and electricity. Services related to agriculture including harvesting, cultivation, supply, packaging, warehouse, renting or leasing of machinery are also exempted. Further items transported by individuals through public transport, metered cabs, auto-rickshaws, metro, etc. are also outside the GST.

BOX -1

List of Commodity Groups (Goods)

The tax revenue based on the returns (GSTR-3B and PMT08/GSTR-4) submitted by the taxpayers is analysed on the 'related return period liability basis.' For year on year (2018-19 and 2019-20) and Covid period (March to August 2020) analysis, the related returns (monthly/ quarterly) submitted till September 30, 2020 are taken. (For example if a taxpayer failed to submit the March 2020 return but submitted  before September 30, 2020, then her  tax revenue is taken for our analysis). This exercise is done to ensure and compare the revenue and consumption pattern during pre and post Covid period as accurate as possible.

The tax collected during a given month (say April) is  to be remitted by the taxpayer  to Central and State Governments, after deducting the eligible  input tax credits before the 20th day of the next month (say May). The trend during the past three years (pre-Covid period) in Kerala shows that on an average 60 percent returns and tax are submitted during the due month itself followed by a lag of about 4 months for the remaining 35-40 per cent return and tax. Since the analysis in this article is made on 'related return period liability basis' any comparison of these figures with month on month remittance will not tally due to difference in arrear payments. By doing the above process, 91.8 per cent of returns during the period from March 2019 to August 2019 and 64.5 per cent during the period from March 2020 to August 2020 are included in the tax remittance for the relevant six months period.

The total tax revenue under each sector represents the net taxes (after deducting eligible input tax credits) remitted by the taxpayer through their periodical returns under different tax rates for each of the goods/services.  From these tax figures, the calculation of connected turnover without any duplication in the supply chain would give a direct picture of the sector-wise consumption pattern in Kerala. Such an attempt has not been made here due to complexity and non-reliability of correct turnover figures. In its place the sector-wise tax amount representing each sector is analyzed which indirectly depicts the sector-wise consumption pattern in the Kerala through the lens of GST remittances

GST during three years

The sector-wise commodity and service groups tax revenue since the introduction of GST for the three years period with its percentage share on total and growth rate for 2019-20 over 2018-19 is depicted in Table.1

Table 1. Sector-wise Tax Revenue State GST -  YoY Commodity Groups (Goods)