The revenue of the top 18 states is predicted to increase at a constant rate of 8–10% this fiscal year to Rs 38 lakh crore, driven by robust Goods and Service Tax (GST) collections and devolution from the federal government, according to a research released on Wednesday.
The CRISIL Ratings study claims that these states, which make up more than 90% of India’s total state domestic product, expanded at a rate of 7.5% in the previous fiscal year.
The sales tax revenue from petroleum products (7-8%) and the grants suggested by the 15th Finance Commission (10-11%) will grow by mid-single digits, but the revenue from the tax on liquor sales (10% of total revenue) will be unchanged.
“The biggest impetus to revenue growth will continue to come from aggregate state GST collections that, after growing 18 per cent on-year last fiscal, will climb up another 13-14 per cent in the current fiscal,” said Anuj Sethi, Senior Director, CRISIL Ratings
Central tax devolutions will be the second major driver, with growth predicted to reach 12–13% this fiscal year.
The Finance Commission sets the percentage of devolution, but the Center links the total fund to gross tax collections.
According to the research, this pool, which increased by 19% year over year in the previous fiscal year, could continue to grow at a robust rate this fiscal year due to increased income tax and GST revenues.
“After a flat fiscal year last year, revenue from sales tax on petroleum items is expected to climb by a moderate 3–4% year over year this fiscal year. According to Aditya Jhaver, Director of CRISIL Ratings, “this will result from higher fuel consumption driven by vehicular and industrial activity, even as the tax structure remains largely unchanged.”
