Goods and Services Tax revenue accumulates towards consumption more than production due to the ‘destination principle’ followed in most of the ‘place of supply’ provisions of GST Law. ‘Place of supply’ determines the accrual of taxes on goods and services to the States in the inter-state supply inwards.  But the amount of actual revenue collection of four years of GST experience portrays the other way round to the consumption inclined states specially Kerala.
Why Kerala is not collecting comfortable revenue from GST despite ranked first in per-capita consumption of goods and services among all States as depicted by NSSO data?
Why, even after four years, the concepts and the spirit of the GST law is not satisfactorily working in Kerala in terms of revenue expansion even as more than 80% of the goods and services consumed in Kerala are originally brought from other states as ‘inter-state supply inwards?
All states/union territories in India are consuming but only few states are producing either equally or more than that of their domestic consumption of goods and services. The word ‘consumer state’ means a State where the quantum of consumption within the state is more than that they produce domestically and majority of their final consumed goods and services are coming from other states as inter-state supply inwards and from other countries as imports.
This paper attempts to explore the revenue from inter-state supply inwards of goods/services by demystifying Integrated Goods and Service Tax (IGST) revenue settlement provisions treasured in the sections 17 and 18 of IGST Act 2017.
1.    Components of States’ Revenue from GST
State Revenue from GST comprises the following three components
(a)    State Goods and Services Tax (SGST) - SGST (State GST) output tax on all the intra-state supply outward (goods/services or both) paid by the registered person after utilising the eligible input tax credits of SGST on intra-state inward supply (Section 49 of Kerala GST Act 2017) (if any) and the balance (if any) paid in Cash.
(b)    (i)Integrated Goods and Services Tax (IGST) through the settlement from Central Government on B2B (registered person to registered person) inter-state supply inwards - SGST (State GST) output tax on all the intra-state supply outward (goods/services or both) paid by the registered person after utilising the eligible input tax credits of IGST on inter-state inward supply or from IGST of imports made by him/her. (Section 18 of the IGST Act 2017). The IGST input tax credits so utilised will be transferred to State Government from Government of India

(ii) Integrated Goods and Services Tax (IGST) through the settlement from Central Government on other than B2B intra-state supply inwards - Share (50%) of the IGST on all Inter-state supply inward of goods/services or both in eight different situations mentioned in section 17 of the IGST Act 2017 (initially settled by ad hoc basis and subsequently settled based on apportionment procedure as per the section).
     (c) Compensation Cess – If the revenue from (a) +(b) mentioned above of a State does not achieve the yearly protected growth rate of 14 per cent, then the revenue gap will be compensated from Government of India as per the Goods and Services Tax (Compensation to States) Act 2017 for five years i.e., till June 2022. This amount is  transferred to states under the head Grants-in-aid from Government of India.
2.    The flow of Revenue under Inter-state supply (IGST)
How GST system is working in inter-state supply system is narrated with the example of Tamil Nadu and Kerala in the following three tables below:

The three tables (Table 1, 2 &3) reveal that the entire GST revenue for the sale of raw materials, goods manufactured at Tamil Nadu and subsequently sold to Kerala will finally accrue to Kerala. It means the Tamil Nadu Government should remit to the IGST Account the entire collected SGST of the goods/services or both supplied to Kerala for the settlement of IGST amount to Kerala.
3.    Inter-State taxing system: Pre-GST vis-à-vis GST System
During pre-GST period the Central Sales Tax (CST) is levied and collected by the selling state (Tamil Nadu) from the registered person of the purchasing state (Kerala) at the concessional rate of 2% as per the provisions of Central Sales Tax Act 1956. The purchasing state’s (Kerala) landing cost is the purchase value including all transport charges plus CST which is not recoverable like GST. In the example (Table 4) the goods brought through inter-state purchase after adding the profit margin will be sold within the state and State VAT is levied on the selling price and the entire amount is remitted to Kerala
Considering the same figures for the GST period the recipient of the purchasing state will have to pay the full IGST (here no concessional rate is applicable as in the case of Pre-GST period) to the Supplier of the selling state. The recipient of Kerala will subsequently utilise the credit of IGST after selling the goods/service within Kerala and the net amount of CGST/ SGST are remitted.  The IGST input tax availed for paying SGST amount will be transferred to the appropriate state from the IGST account maintained by the central Government as per the credit utilisation provisions of the GST law. The IGST utilisation can be availed  in two different ways. Under the method 1, the registered person  in Kerala fully utilises the IGST credit for remitting the CGST and the balance for remitting SGST. In the second method the IGST credit is utilised equally for remitting the CGST and SGST amount (Table 5)