Why GST is destination based tax

Why GST is destination based tax

GST, VAT or any indirect tax can be either origin/production based or destination/consumption based. It makes more sense to tax consumption rather than tax production. This is because the person is willfully consuming a product and needs to pay the tax. Unlike direct tax like income tax wherein just because you are earning income you get taxed. In income tax irrespective of whether you save or consume you are penalized. In consumption concept you get taxed only if you consume and the choice is yours (especially with respect to luxury and discretionary goods).

Under consumption principle, the state/country where the consumption happens gets the GST revenue. Certain states/countries might have high GDP growth rate and consumption is high. If they get the GST revenue it will boost further growth.

Also from OECD, guidelines under destination principle exports will not be taxed but imports will be taxed. Thus if India imports, it will get taxed and revenue will go to Indian government. If it was origin based then tax revenue would have gone to the country that exported goods to India.