Money spinners: Sales tax collections from petro products, which constitute 7-8% of revenue, were projected to grow 3-4%. File photo.
| Photo Credit: A.M.FARUQUI
Revenues of India’s top 18 States are likely to grow by 8%-10% this fiscal year to about ₹38 lakh crore, accelerating from a 7.5% uptick in 2023-24, largely aided by a rise in collections from the Goods and Services Tax (GST), rating agency CRISIL said on July 2.
These States, which include Maharashtra, Gujarat, Tamil Nadu, Kerala, Uttar Pradesh, Telangana, West Bengal and Rajasthan, account for more than 90% of India’s Gross State Domestic Product or GSDP. GST Collections and tax devolutions from the Centre constitute about 50% of aggregate State revenues.
“The biggest impetus to revenue growth will continue to come from aggregate State GST collections that, after growing approximately 18% last fiscal, will climb up another 13%-14% in the current fiscal,” said Anuj Sethi, senior director at CRISIL Ratings.
CRISIL reckoned that central tax devolutions to States would grow about 12%-13% this year, from about 19% in 2023-24. “While the proportion of the devolution is determined by the Finance Commission, the overall kitty is linked to gross tax collections by the Centre. This pool should grow at a healthy pace this fiscal as well, supported by rising income tax and GST collections,” the firm said.
State’s own revenues from taxes on liquor and petroleum sales were expected to remain stable, with a marginal increase in growth this year. Taxes on liquor, which account for 10% of total revenue, were estimated to rise 5%-7% from a 5.8% growth last year.
Sales tax collections from petroleum products, which constitute another 7%-8% of States’ total revenue, were projected to grow 3%-4%, compared with a 1.4% rise in 2023-24. After a flattish performance last fiscal, the petroleum sales tax kitty would rise modestly, thanks to higher fuel consumption driven by vehicular and industrial activity with a largely unchanged tax structure, reckoned Aditya Jhaver, CRISIL Ratings director.
“While consumption is expected to grow about 5%-6%, cuts in the prices of petrol and diesel undertaken this March will impact growth in sales tax collections by around 200 basis points,” he said. One basis point equals 0.01%.
