India’s top 17 States’ overall revenues were expected to grow at a moderate 7%-9% rate this year from about 25% in 2021-22, but their Goods and Services Tax (GST) collections would likely increase by about 20%, Crisil Ratings said on Wednesday.
Aggregate State GST collections, which had already rebounded by about 29% last year, would provide the biggest impetus to the revenue growth for these States which account for 85%-90% of aggregate Gross State Domestic Product (GSDP).
“We expect this momentum to sustain and collections to further increase about 20% this fiscal, supported by better compliance levels, higher inflationary environment and steady economic growth,” said Anuj Seth, senior director at Crisil Ratings.
India’s overall GST collections in the first four months of FY23 stood at ₹6.02 lakh crore, rising 34.8% from a year earlier. However, GST revenues had slipped below the ₹1-lakh crore mark in May and June 2021 amid the second COVID-19 wave.
With GST compensation payments, which accounted for 7%-9% of States’ revenue in the past two years, coming to an end from July 1 this year, the uptick in GST revenues would help State finances, Crisil reckoned.
“Healthy tax buoyancy will support revenue growth, with GST collections and devolutions from the Centre — together comprising 43-45% of States’ revenue — expected to show robust double-digit growth,” it said.
