A Study of GST on Foreign Direct Investment Trends in Uttar Pradesh

It is evident from the data that the introduction of Goods and Services Tax (GST) has been a great success in consolidating India's indirect tax regime in terms of tax compliance, widening tax base and better revenue collection. As of FY 2024–25, total GST collection in India has seen a near three times increase from ₹7.40 lakh crore during FY 2017–18 to ₹22.08 lakh crore in FY 2024–25. GST collections slowed down in FY 2020-21 due to the COVID-19 pandemic, but rebounded strongly and continued to grow in subsequent years which is a clear indication of economic activity, digitisation process and enhanced compliance framework of government. The state-wise analysis shows that Maharashtra, Gujarat, Karnataka, Tamil Nadu and Uttar Pradesh are the major contributors in terms of revenue from GST as they have high industrial, commercial and service activities. Of these, Uttar Pradesh is one of the biggest when it comes to the collection of the Goods and Services Tax (GST). The increase in the state's GST revenue from ₹36,891 crore (FY 2017–18) to around ₹1,86,315 crore (FY 2024–25) highlights significant growth in economic activity, increased tax base and enhanced tax administration. Although the slowdown was experienced during the pandemic, Uttar Pradesh has shown great resilience and had sustained revenue growth in the post-pandemic period. Foreign Direct Investment (FDI) data also indicate that India's status as an investment destination for the world's is becoming more and more attractive. This has been driven by policy enhancements, easing of investment regulations and the improvement of the ease of doing business, and cumulative FDI inflows rose to ₹99.08 lakh crore (US$1.12 trillion) by September 2025. The largest investments were made in the services and information technology sector with the states of Maharashtra, Karnataka, Gujarat, Delhi and Tamil Nadu continuing to see the highest levels of investment. FDI inflows in Uttar Pradesh have been on a steady rising trend despite of the negative impact of COVID-19. From FY 2020-21, investment rose from nearly ₹2,200 crore to nearly ₹3,700 crore in FY 2024-25, adding up to an estimated total of nearly ₹16,316 crore over the period covered by the study. Despite still having a lower pace of FDI compared to other top investment hotspots in India, the steady growth is a result of the steady improvements in infrastructure, industrialization, investor-friendly policies and programmes like the UP Investors Summit, One District One Product (ODOP) and development of industrial corridors. The study of the GST collections and FDI inflows indicates that economic reforms have had positive impacts on the mobilization of revenue and growth of investments, and Uttar Pradesh has been a rapidly developing state with significant positive gains on both tax collection and investor confidence. Going ahead, continued policy changes, infrastructure development, ease of doing business and digital governance are expected to further boost the GST revenue, boost FDI and contribute towards sustainable economic growth of India and Uttar Pradesh.

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