When the Goods and Services Tax (GST) was rolled out in July 2017, Tamil Nadu, like several other manufacturing-heavy States, had its reservations. Sever years on, the evidence is mixed but hopeful. Tamil Nadu’s GST journey reflects a broader structural transition from manual to digital, informal to formal, and isolated to integrated.
In the initial years, Tamil Nadu relied heavily on GST compensation due to sluggish collections. However, with consistent economic recovery, improved compliance, and data-driven enforcement, the State’s GST revenues have stabilised and grown. The State GST (SGST) revenue rose from Rs. 26,813 crore in 2017-18 to Rs. 53,478 crore (provisional) in 2023-24, more than doubling in six years.
The stipulated end of compensation in June 2022 was a litmus test. Encouragingly, Tamil Nadu did not face a sharp revenue cliff – thanks largely to better taxpayer compliance, widened tax base, and recovery in sectors like textiles, auto components, and services.
Perhaps the most dramatic transformation post-GST has been cultural. Tamil Nadu now has over 13 lakh GST-registered taxpayers, up from 6.9 lakh in 2018. Return filing rates (GSTR-3B) now hover a healthy 90 per cent, while e-invoicing adoption has improved significantly since the threshold was lowered to Rs. 5 crore.
The Chennai GST Zone, one of the largest in the country, is often cited as a compliance model combining analytics, outreach, and enforcement. But gaps remain. Many MSME in Tier-II cities like Salem, Karur, and Madurai still struggle with the technical complexity and filing costs. Delayed input tax credit (ITC) claims, system glitches, and frequent rule changes add to their budern.
The GST regime has unevenly impacted sectors. The winners include textiles and apparel (Tirupur, Coimbatore). Integrated supply chains, faster refunds, and formalisation have strengthened this export-driven sector. In the case of auto components and electronics (Chennai-Hosur belt), GST unified production and distribution lines. In warehousing and logistics, the removal of inter-State check posts led to a 15-20 per cent reduction in transit time, transforming Tamil Nadu into a logistics hub. However, certain sectors are yet to recover fully from the shift: handicrafts and cottage industries, especially in Madurai, Kanchipuram and Thanjavur suffer from low ITC utilisation and high compliance burdens; and real estate and private education/ health services face ambiguity over tax treatment for auxiliary services.
Tamil Nadu has raised State-specific issues in the GST Council. It has demanded zero-rating for traditional handicrafts, pushed for simplified rate slabs, and strengthened State enforcement mechanism using AI and data mining.
Source: The Hindu businessline
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