In the first eight months of FY24, the combined SGST, excise duty and S&R collections of the 16 states expanded by a moderate 10-12%, according to the report.
The combined revenue receipts of 16 state governments recorded a “shallow” growth of about 5% during the April-November period of the current fiscal, much lower than the budgeted 17.4%, according to a report by rating agency Icra.
The contraction in sales tax and lower-than-budgeted growth of state goods and services tax collections (SGST), excise duty and stamps and registrations (S&R) during the first eight months of FY24 restricted the growth of states’ own tax revenues to around 11%, the report said.
The 16 states selected for analysis exclude the North-East, the hill states, Goa, and Bihar.
In the first eight months of FY24, the combined SGST, excise duty and S&R collections of the 16 states expanded by a moderate 10-12%, according to the report. However, the states’ sales tax collections contracted by 1.4%, limiting the growth of states’ own tax revenues.
A steep decline in grants from the Centre during April-November also impacted the states. Grants of 13 of the 16 states contracted during the period, resulting in a combined drop of about 31%, against a 19.8% growth in the budget estimate (BE).
“Even if a sizeable portion of the grants is released by the Centre to the states in Q4FY24, the actual growth of combined revenue receipts in FY24 is still expected to miss the targeted growth rate by a wide margin,” the report said.
While Icra expects the actual tax devolution to exceed the amount budgeted for FY24 by `30,000 crore, it would still not be adequate to offset the anticipated shortfall in grants in the ongoing fiscal. “While we expect an upside in tax devolution in FY24, its quantum may not be adequate to fully offset the shortfall in grants,” it said.
The report further pointed out that the sales tax mop-up of states witnessed a contraction during April-November due to a moderation in the consumption of petrol and diesel. After increasing by 10.4% in FY22 and 13.4% in FY23, the pace of consumption of petrol moderated to 6.0% during the period. Similarly, after rising from 5.5% in FY22 to 12% in FY23, the pace of consumption of diesel eased to 6.7% in the first eight months of FY24, according to the report.
Source:financialexpress.com