Most of the poor states are those which are not industrialized. The examples are UP, Bihar, West Bengal, MP, Rajasthan etc. These states are only the consumers of goods and services rather than the producers/manufacturer.
GST is a destination based tax. This means that tax would accrue to the state where the goods or services are consumed. In the present regime, it is the manufacturing states like Tamil Nadu, Gujarat, Maharastra who are beneficiary because when the goods produced/manufactured in their states are consumed in other state, they get 2% Central Sales Tax (CST) on intra-state tax. This CST would be abolished in the GST regime as the entire country would become a single market.
Hence, the real beneficiary would be the consuming states which are not the producing states as they would get GST for all the goods and services consumed in their state irrespective of the state of production.
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CA JAIN ALOK
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